RCBC expects net profit to rise 8% to P5.2B this year

MANILA, Philippines—Yuchengco-led Rizal Commercial Banking Corp. expects to grow its net profit by at least 8 percent to hit around P5.2 billion this year on the back of faster growth in lending to small and medium enterprise and consumer sectors, according to its president.

RCBC has yet to announce full-year 2011 results but it previously set its net profit guidance at P4.8 billion, 85 percent of which has been achieved in the first nine months of last year. It grew January-to-September net profit by 11.4 percent to P4.08 billion.

“We’re focusing on a lot of consumer loans, SMEs, micro-finance. Those are the good sectors; NPLs [non-performing loans] are lower, margins are higher,” RCBC president Lorenzo Tan told reporters during Friday’s annual cocktail reception for bankers by the Bangko Sentral ng Pilipinas.

Explaining the bank’s 2012 budget, Tan said RCBC has projected an average 15-percent growth in lending, although some areas were seen growing at a faster clip of 20 percent. “We’d like to grow SME and consumer (lending) faster,” he said.

Corporate lending has likewise been very busy, Tan said, noting that the bank has pumped in money to a lot of power projects in the fourth quarter of 2011.

RCBC, however, is not counting on a lot of earnings from proprietary trading this year.  “Our treasurer (Jose Emmanuel Hilado) is always conservative. He’s forecasting less (treasury earnings) than last year,” he said.

While the bank plans to continue its organic growth, it is scouting for acquisition opportunities. “We brought in investors last year so that we could look at acquisitions and further grow our balance sheet. So we’re looking around for banks to buy,” Tan said.

RCBC was ready to bid for GSIS Family Bank in December but the auction was restrained by a petition filed by the bank’s former owners, the family of former Cavite Representative Renato Dragon.

Last year, RCBC brought in two strategic minority investors—the World Bank group’s private sector financing arm International Finance Corp. and a unit of global private equity firm CVC Capital Partners—as part of its capital build-up program. IFC bought a 7.2-percent stake for P2.1 billion and CVC Capital, 15 percent for P4.96 billion. These equity infusion helped build the bank’s capital funds to P41.19 billion.

Apart from last year’s equity deals, RCBC recently raised $200 million from the sale of five-year offshore debt paper at a yield of 5.25 percent.

RCBC, which now has 390 branches, plans to open 20 to 25 new branches each year together with its thrift banking unit.

Asked what he expected to be the bank’s biggest challenge this year, Tan said it would be to enhance profitability and efficiency. “So we invested in a core banking platform. We have been working on it in the last four years and expect to turn it on this mid-year so we’re hoping that with new technology we’ll have a scalable, nimble system; then we can start lowering cost (to income) ratios and reduce people intervention,” he said.