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Biz Buzz: RCBC’s white knight?

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Biz Buzz: RCBC’s white knight?

/ 01:17 AM June 19, 2017

In the world of business, the death of the leader of a large corporation is usually followed by uncertainty in the firm’s future direction, which is then reflected in the market through a decline in its stock price.

But the exact opposite happened to Rizal Commercial Banking Corp. after its founder and former chair Alfonso Yuchengco passed away last April. In the days immediately following his demise, the stock price of RCBC rose sharply, peaking just a few days ago at P65.50 a share (coming from a price of only P39.90 the week before the tycoon’s passing).

For stock market investors and observers, that’s no mean feat. That means the bank’s market capitalization increased from only P54 billion to P92 billion, leaving all shareholders 70 percent wealthier in just six weeks.

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When asked about the reason for the stock’s rise, no one would say it outright but the unspoken understanding among market punters is that there is an expectation that RCBC’s ownership will change hands with the changing of the guard at the financial institution. That’s not an unfounded assumption, of course, given that no less than the central bank’s top brass have indicated that a change in direction is necessary for the bank in the wake of last year’s $81-million Bangladesh money-laundering scandal.

Out of respect for the elderly Yuchengco, an old hand and an institution in the local financial industry, the central bank would hold back from the harshest of sanctions—forcing an ownership change—while he was still alive, according to Bangko Sentral ng Pilipinas insiders. That explains the jump in the stock price: The market’s expectations that a new owner will come in to take the bank in a new direction.

Last week, however, saw the market giving up some of the stock price gains in RCBC. Indeed, some of it is due to profit-taking after a sharp price run up, but there are also some indications that the change the market is expecting will not come as soon as it had hoped for.

Word on the street is that, yes, the central bank remains intent on executing its original plan of requiring RCBC’s owners to inject fresh capital into the bank to the tune of a few billion pesos (something that a new investor would be able to do). At present, the bank is under a BSP regulatory regime called “PCA” or “prompt corrective action”—dreaded words among bankers indicating that your firm is under a form of probationary status and “handcuffed” against undertaking some profitable (and risky) activities.

“RCBC will have to raise new capital, but it looks like the existing owners can do this themselves, without the need for a new partner,” said one official familiar with the situation.

More importantly, RCBC already has an existing partner with more than enough financial muscle to meet any capital infusion regulators may require. That, of course, is Cathay Life—a large Taiwanese insurance firm —which currently owns 20 percent of the bank.

(Those expecting the only local financial group large enough to swallow RCBC to step in— we’re talking about the Sy-owned BDO Unibank or its surrogate China Bank—we understand that’s a non-starter for now, as well, for both professional and personal reasons among the owners.)

“No need to look for a ‘white knight’ from outside the bank,” said the official, dousing speculations about an imminent takeover by an external investor. “The partner who can help it is already inside.”

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That shareholder changes won’t be happening very soon probably explains why RCBC’s stock price started trekking lower last week.

Of course, the question is not “if” but “when” the bank will raise fresh funds from its existing shareholder and by how much the Yuchengcos will step back from day-to-day management of the institution. Abangan. —DAXIM L. LUCAS

Still in search of a CEO

PLDT Inc. chair Manuel V. Pangilinan presided over the company’s annual meeting last week as returning CEO for a second straight year.

This is longer than expected and was perhaps a testament to both the challenges the company is facing in its turnaround strategy and the possibly more difficult task of finding a suitable successor to fill such large shoes. (Maybe his comment about a candidate willing to “die for the job” played a role in this.)

In any case, it could be a longer wait still. Pangilinan said it was likely a successor would be named in 2018—pushing back a timeline earlier expected around the second half of this year.

He conceded it might be difficult to find someone exactly like him, as far as work habits are concerned. “You know, when God made me from some mould, he threw away the mould,” Pangilinan said.

The search has been expansive, with names from within PLDT and even outside being added to a list of unknown length.

Pangilinan said the search had yielded key insights, especially on the “surprising” number of potential Filipino candidates holding key corporate positions abroad.

Among these, Filipinos working in Silicon Valley and even those in non-technology-related industries. Pangilinan said the main requirements were the same: Someone younger and with deep experience in the digital realm.

When is the exact announcement next year? Well, that might depend on how well PLDT executes its turnaround plan.

“If profits are better than expected, I might want to stay and report [in the 2018 annual meeting] that ‘oh, i did this’,” Pangilinan quipped. —MIGUEL R. CAMUS

7-Eleven’s logistics play

Apart from an aggressive 7-Eleven convenience store franchising program (the latest package requires only a cash outlay of P300,000), retailer Philippine Seven Corp. (PSC) pitches to catalyze the fledgling e-commerce industry by opening up its logistics backbone to e-commerce providers. In short, consumers who purchase the products online can pick them up at 7-Eleven’s more than 2,000 stores.

Every day, PSC has 400 trucks delivering goods to fill its nationwide store network (each truck serves about five stores). This internal system delivers 200,000 cases or the equivalent volume a day, translating to more than a million items of consumer goods. This volume already approximates the entire Philippine logistics market, which delivers around 200,000 packages a day, PSC president Jose Victor Paterno said in a press chat at the sidelines of the company’s stockholders’ meeting last Friday.

“We have a very efficient logistics network because everyday, we have a truck that comes to our store. So all the e-commerce partners have to do is deliver to our warehouse and then we deliver to our stores, loading them on our trucks that are already going there,” Paterno said.

Paterno added that PSC could offer the lowest logistics cost in the country because it was just using the extra space on its trucks that were bound to go to these stores anyway. Except for the software needed to manage the movement of goods, there’s no additional cost for PSC to open up its system to e-commerce partners. Also, when customers pick up the products at its stores, they don’t need to be in a box so there’s less expense in package.

PSC is now pilot-testing a new system for this in 15 stores and is set to roll out further to 200 stores this week.

“Like any retailer, we sell other people’s products but we also come up with our own private label—that’s basically the trick shot—focused on items under P1,000 because that’s underserved by the existing vendors,” Paterno said. To get the ball rolling, PSC is set to sell using such e-commerce system

T-shirts, which come from the excess inventory of its Taiwanese partner.

In Taiwan, 50 percent of e-commerce packages are delivered through store channels, which means buyers pick the goods at the convenience store. The same system could be offered here at a much lower cost than door-to-door delivery.

“Here, many people don’t really have an exact address so logistics is difficult. And most people don’t have a bank account, let alone a credit card. So how do they pay? They pay COD (cash on delivery) and the existing incumbent players have learned how to do COD, but it’s not easy nor very profitable for them,” Paterno said.

“So we are offering basically what Taiwan is offering. Pay and pick up at our stores,” he said. —DORIS DUMLAO-ABADILLA

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TAGS: 7-Eleven, Business, Manuel V. Pangilinan, Rizal Commercial Banking Corp.
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