Yuchengco-led Rizal Commercial Banking Corp. has unlocked P731 million in core or tier 1 capital after completing the sale of publicly listed firm Bankard Inc.
RCBC sold a 65.42-percent stake in Bankard after transferring the credit card operations to the parent bank, paving the way for the backdoor listing of new businesses through the shell company.
In a disclosure to the Philippine Stock Exchange, RCBC said the sale of publicly listed shell firm Bankard to RYM Business Management Corp. and other investors was completed through a block transaction on Dec. 27.
The transaction will allow the RCBC group to recognize a net gain on sale of about P123 million, monetizing the value inherent in the listed corporate vehicle, the disclosure said. In particular, RCBC will book a net gain of P69 million while RCBC Capital will recognize a net gain of P54 million. Net gain after taxes and fees and after taking into account the cost of investment is about P123 million.
The transaction will allow RCBC to release about P731 million of common equity tier 1 capital, representing its share in the net book value of Bankard combined with the net gain.
“This capital release could translate into an incremental increase in the bank’s loan books by P7.3 billion, deriving incremental annual net interest earnings, assuming a 4 percent spread, of P292 million,” RCBC said in the disclosure.
The sale was consummated for a total consideration equivalent to a 72.7 percent share of the net cash in the balance sheet of Bankard plus a 65.425 percent share in the corporate vehicle premium amounting to P250 million.
RCBC said the sale of Bankard was part of its capital raising/capital release program in compliance with the new Basel 3 capital guidelines which took effect on Jan. 1.
“The transaction allowed RCBC to meet and exceed the minimum core equity tier 1 ratio of 8.5 percent and the minimum total capital adequacy ratio (CAR) of 10 percent,” it said.
The Basel 3 capital adequacy ratio framework introduces a complex package of reforms designed to improve the ability of banks to absorb losses, extends the coverage of financial risks and requires stronger firewalls against periods of stress.
Shareholders of Bankard also agreed earlier to amend the company’s articles of incorporation to change its name to Bright Kindle Resources and Investments Inc. and its primary purpose into a property holding firm.