Japan’s 2nd largest bank buys 4.99% stake in RCBC

MANILA, Philippines — Tokyo-based Sumitomo Mitsui Banking Corp. (SMBC) has acquired a nearly five percent stake in Yuchengco-led Rizal Commercial Banking Corp. (RCBC) for P4.48 billion as part of its efforts to expand franchise and strengthen digital banking in Asia.

RCBC president and chief executive officer Eugene Acevedo signed the definitive agreement with Sumitomo Mitsui Financial Group Inc. president and group chief executive vice president Jun Ohta and SMBC president and CEO Makoto Takashima last Monday.

In a statement, the SMBC Group, with a global presence in 40 countries, said it has been pursuing growth opportunities in other Asian markets through inorganic means.

“SMBC views the Philippines as one of its important markets and has been expanding its presence in the country through the opening of SMBC Manila branch and other related initiatives,” the Japanese bank said.

Through multi-dimensional collaboration with RCBC, the SMBC Group aims to accelerate its growth strategy in Asia while contributing to further development of the Philippines’ financial industry.

In a virtual press conference, Acevedo said RCBC’s digitalization plans is more than just applying for a digital banking license with the Bangko Sentral ng Pilipinas (BSP), as the entry of one of the largest banks in Japan is part of its capital raising plan to support long-term asset growth and digital investments.

“With this partnership, RCBC affirms its commitment to our shareholders to continually seek significant opportunities for synergies that will allow us to solidify our plans for digital investments and continually invest for the future,” Acevedo told reporters.

Acevedo added the partnership would involve a more powerful data science team, improvement of customer experience in various channels, digitizing bank office and branch channels through robotics and automation, and movement of brick and mortar transactions to mobile or mobile app after it closed down 70 branches last year.

Aside from Diskartech, Acevedo revealed RCBC is incubating and growing another business that it could potentially spin off as a separate and independent digital bank in the future.

RCBC senior vice president John Thomas Deveras said the transaction involves the acquisition of 101.85 million treasury shares of RCBC at P44 per share for a total consideration of P4.48 billion.

Deveras, who is also head of strategic initiatives, as well as asset management and remedial group, said the price was 97 percent of the bank’s book value per share at P45.39 as of May 31 and 2.23 times the average market price of RCBC stock at P19.72 per share from July 2019 to June 29 this year.

Aside from establishing a strategic partnership with SMBC, Deveras said RCBC would be able to grow risk assets by another P100 billion with the new capital infusion.

After the transaction, the Yuchengcos, through Pan Malayan Management and Investment Corp., would own 50 percent of RCBC, followed by Cathay Life Insurance Co. Ltd. with 22 percent, SMBC with five percent, and International Finance Corp. with three percent.

“I think our existing shareholder plantilla is among the strongest that any bank can dream of. So I don’t think there is a need to bring in a fifth strategic investor,” Deveras added.

Ma. Christina Alvarez, senior vice president and head of corporate planning group at RCBC, said the capital infusion would help improve the bank’s common equity tier 1 (CET-1) ratio to 11.75 percent in end-June from 11.01 percent and its capital adequacy ratio (CAR) to 15 percent from 14.3 percent.

Both RCBC and SMBC share the same vision of accelerating digital transformation in order to deliver customer-centric banking products and services with customer experience.

Under its three-year Digital Payments Transformation Roadmap, the BSP has committed to shift half of total retail transactions to digital channels and raise the number of Filipino adults with bank accounts to 70 percent by 2023.

“The partnership with SMBC will further enhance RCBC’s digital efforts in creating innovative, inclusive, and interoperable digital solutions, aligned with BSP’s ambition in promoting financial inclusion among the underserved and unbanked segments,” RCBC said in a separate statement.

Under the partnership, the Yuchengco-led bank also intends to leverage the know-how and expertise of SMBC in the field of consumer banking not just in Japan but in other developing countries such as Vietnam.

The listed bank to the Philippine Stock Exchange (PSE) in a disclosure that the execution of the transaction is subject to regulatory approvals related to the treasury shares.