Yuchengco-led Rizal Commercial Banking Corp. (RCBC) is confident it will sustain its seven percent first-half net income growth and hit double-digit for the rest of 2021 on the back of an improving loan portfolio and decrease in bad loans in the next two quarters.
RCBC reported Monday, August 16, that it gained P3.327 billion in net income as of end-June this year, up from P3.110 billion same period in 2020, boosted by customer loan expansion which increased by nine percent despite a two percent industry-wide decline.
The bank continued its strategy of focusing its business in select segments such as top corporates and small and medium enterprises (SMEs) and in areas outside of Metro Manila, according to RCBC head of corporate planning group, Chrissy P. Alvarez. Corporate segments grew by 10 percent during the first half, while the SME segments were up by 17 percent.
Alvarez said there is “strong momentum in core business volume growth” despite mobility restrictions. The bank’s income performance in the first six months “reflects (its) strategy to grow in select segments while managing risks.”
“We believe that we can sustain the performance of the first half (on to the second half of the year) and hit a double-digit growth from the 2020 net income but that assumes the ECQ (enhanced community quarantine) ends on August 20. Our forecast do not consider any further ECQs,” said Alvarez in a virtual press briefing.
RCBC has been increasing its SME lending especially outside of Metro Manila. It has put up SME satellite offices in Bohol, Palawan, Nueva Ecija, and CALABARZON.
At the end of June, RCBC has set aside P2.3 billion in impairement losses which was 55 percent lower compared to same time in 2020 when the bank was building up for COVID-related non-performing loans (NPLs).
Alvarez said the bank’s NPL ratio which was 3.3 percent in June 2021, will improve by the end of the year, and close near its 2020 level of 2.9 percent. “We’re targeting a similar level for year-end,” she said.
“Our NPL ratio (is) higher than last December 2020 but within our expectations. We expect this to improve towards the end of the year as the bank continues to work on the CARE (COVID Assistance and Recovery) program for select clients. And, we continue to aggressively work on remedial and collection initiatives for past due accounts,” added Alvarez.
Bennett D. Santiago, RCBC’s chief credit officer and head of credit management group, said they have taken a “hard look at our lending portfolio”.
“We triage each customer and based on each assessment, offer or provide the best financial assistance package necessary,” said Santiago. So far, RCBC has offered CARE to 10,000 consumer and credit card customers and more than 300 wholesale customers mostly from middle and SME segments.
Santiago said NPLs have reached its peak level, and these bad loans are mostly driven by the second Bayanihan law after its loan payment moratorium expired. Since July this year, the bank’s NPLs have started to go down, he said. Based on central bank data, industry level NPL ratio stood at 4.48 percent in June.
RCBC’s total assets in the first six months have risen by 18 percent to P845.8 billion. Its total deposits went up by 20 percent and its capital funds also increased by 23 percent. The bank’s capital ratio is currently at 15.1 percent and CET1 ratio at 11.8 percent. As for the annualized return on equity, this stood at 6.6 percent while return on assets was at 0.8 percent.
During the online press chat, RCBC chief economist Michael L. Ricafort said they are forecasting a full-year GDP growth of 4-5 percent for 2021, and 6.5 percent to seven percent in 2022, with increased infra spending as growth driver.
For the third quarter 2021, Ricafort projects a 6-7 percent GDP growth which already incorporates the August 6-20 lockdown. The next GDP growth from a “spectacular” low-base effects growth of 11.8 percent in the second quarter should still be impressive, he added.
Ricafort agreed with most predictions that the domestic economy will recover to pre-pandemic level in 2022 but further lockdowns could delay this recovery to 2023. “But other industries may take more time to recover (tourism, property, and vehicle production),” he said.
In the meantime, he also forecasts the Bangko Sentral ng Pilipinas may tweak policy rate this year by 25 basis points from its current low of two percent, and further raise this to 2.5 percent in 2022. He also expects the peso to breach P51 level next year.
Ricafort is likewise seeing another round of bank’s reserve requirement ratio (RRR) reduction this year by 100 to 200 basis points since the BSP has to cut the RRR every year to reach single-digit level by 2023. “Not ruling out this possibility (for RRR cut),” he said.