RCBC selling $200M worth of hybrid notes

MANILA, Philippines—Yuchengco-led Rizal Commercial Banking Corp. is preparing for stiffer capital requirements under the Basel 3 framework with a $200-million offering of hybrid notes qualifying as tier 1, or core capital.

In a disclosure to the Philippine Stock Exchange on Thursday, RCBC said its board had approved the issuance of Basel 3-compliant hybrid tier 1 capital notes.

Of the proposed $200-million fund-raising, $130 million will be handled by Morgan Stanley and $70 million by Credit Suisse.

Hybrid notes are considered equity from the point of view of the issuer but with some features of a debt instrument.

The BSP has announced that universal and commercial banks will be required to adopt by 2014 the capital adequacy standards under Basel 3, which introduces a complex package of reforms designed to improve the ability of bank capital to absorb losses, extend the coverage of financial risks and have stronger firewalls against periods of stress.

Based on Basel 2 framework, RCBC’s capital funds grew by 11.42 percent to P 41.22 billion at end-June from the same period last year. Capital adequacy ratio to risk assets amounted to 17.11 percent, suggesting more leeway for asset growth from the minimum regulatory requirement of 10 percent. Its tier 1 or core capital ratio stood at 12.73 percent, also exceeding the BSP’s 6 percent current requirement.

RCBC grew its first -half net profit by 35 percent to P3.01 billion year on year as a double-digit rise in non-interest income complemented a modest expansion in net interest income. This translated to an annualized return on average equity of 15.43 percent.