RCBC net income drops 6.3% to P1.19B in Jan-Sept

The Yuchengco-controlled Rizal Commercial Banking Corp. (RCBC) posted a net income of P1.19 billion in the first nine months of the year, 6.3 percent lower than the P1.27 billion profit reported the same period a year ago.

In a financial report filed with the Philippine Stock Exchange, RCBC said the decline in earnings was due to higher interest expenses and lower income from equity investments.

Net interest income, however, rose 12.84 percent from P3.34 billion to P3.77 billion due to reduced funding costs resulting from the increase in traditional deposits vis-à-vis non-traditional deposit and improvement in spreads.

Other income, on the other hand, fell 23 percent to P6.67 billion, largely as a result of the decline in trading income.

Total operating expenses, meanwhile, decreased to P5.82 billion from P6.15 billion. Manpower costs remained under control due to the continuous business process reviews and process improvements that have resulted in greater operating efficiency.

RCBC has set aside provision for probable losses of P888 million, 23.4 percent lower than the previous year’s level of P1.16 billion. Despite the lower provisioning year on year, total provisioning set aside by the bank already exceeded the recommended levels of the Bangko Sentral ng Pilipinas (BSP).

The sale of the bank’s shareholdings in China Banking Corp. in the second quarter of 2004 mainly accounted for the decrease in equity investments of P1.49 billion or by 42.31 percent.

RCBC plans to issue $100 million to $200 million senior notes due in three to five years in the last quarter of the year. The notes issuance is still subject to the BSP’s approval.

The bank recently signed a sale and purchase agreement with Lehman Brothers, a global investment bank, for the sale of its P3.9 billion non-performing loans (NPLs) to Philippine Investments One Inc., a special purpose vehicle established by Lehman Brothers.

It plans to sell more NPLs by engaging two or three more SPVs.

Bank officials expect significant improvements in its NPL ratio, capital adequacy ratio and loan loss provisions.

With Lehman’s acquisition of the bank’s NPLs, RCBC was able to reduce its NPLs to P11 billion. RCBC has a total of P24 billion of non-performing assets.

The transaction between RCBC and Lehman Brothers was the first major SPV sale approved by the BSP under the provisions of R.A. 9182 or the Special Purpose Vehicle Act of 20002.