RCBC sets aside P7.2 billion provision for bad loans

MANILA, Philippines — Rizal Commercial Banking Corp. (RCBC) beefed up its provision for potential bad loans by 38.6 percent to P7.2 billion from January to September compared to last year’s P4.51 billion due to uncertainties brought about by the COVID-19  pandemic.

RCBC president and chief executive officer Eugene Acevedo said the bank has yet to see the full impact of the   pandemic.

“While the bank remains at a relatively healthy position, we have yet to see the full impact of this pandemic. We continue to strengthen our balance sheet in order to soften further impact in the coming months,” Acevedo said.

Unlike other big banks that have been aggressive in augmenting their war chest versus possible bad loans, the non-performing loan (NPL) coverage of RCBC declined to 65.8 percent in end-September from 78.7 percent a year ago despite the rise in NPLs to 3.8 percent from two percent.

RCBC senior executive vice president and treasurer Horacio Cebrero said  the bank is confident about its NPL coverage level right now.

“Based on the views that we have in the portfolio which is rather I think is relatively strong, this level of provisioning is just maximizing the efficiency of funds that we have in the balance sheet,” Cebrero told reporters in a virtual press conference.

Ma. Christina Alvarez, first senior vice president and corporate information officer at RCBC, said the bank needs to reassess its portfolio, as well as NPL and NPL coverage once Republic Act 11494 or the Bayanihan to Recover as One  expires in December.

“For this year, I think  this NPL ratio is a high already and we see  it improving until the end of the year. But again when the Bayanihan expires in December, I mean the 60-day moratorium, we might see more NPL. So there might be a new wave in 2021,” Alvarez said.

In a disclosure to the Philippine Stock Exchange (PSE), the listed bank   reported a double-digit 11.3 percent drop in earnings to P4 billion form January to September compared to P4.5 billion in the same period last year.

RCBC’s net interest income jumped by 20 percent to P19.66 billion from P16.38 billion, while non-interest income declined by nearly 15 percent to P9.69 billion from P11.35 billion despite trading gains offsetting the drop in income form fees and commissions.

The bank’s operating expenses remained almost flat at P16.37 billion from P16.28 billion. Its loan book climbed by 8.6 percent to P445.23 billion during the nine-month period from last year’s P410 billion, while its deposit base grew faster at 17.1 percent to P496.83 billion from P424.18 billion.

As of end September, the banks corporate segment that corner 53 percent of the total loan portfolio went up by nine percent followed by the consumer segment with a 30 percent share with an increase of eight percent.

Alvarez and Cebrero said RCBC has a very positive outlook for 2021.

“We have a very positive outlook for 2021. By that time, we would have reaped benefits on our operating expenses, reaped benefits from our streamline operations from our business process reengineering. We might see more steady provisions versus the bulky provisions of 2020,” Alvarez said.

“If you are going to take a view that there’s going to be a strong economic rebound for 2021 that we are very positive, the growth trajectory and the income trajectory of the bank will be very positive for 2021,” Cebrero said.

RCBC’s asset base increase by nine percent to P731 billion as of end-September from P670.67 billion a year ago, while its return on equity stood at 6.2 percent and return on assets at 0.7 percent.