RCBC's Lower Tier 2 notes oversubscribed

MANILA, Philippines - The Lower Tier 2 unsecured subordinated notes offer of the Rizal Commercial Banking Corp. (RCBC) worth P4 billion was oversubscribed, forcing the commercial bank to close the order book days in advance.

The order book was filled within just the first seven-days of the planned two-week offer period.

In an earlier interview, RCBC president and chief executive officer Lorenzo V. Tan said that the purpose of the offer was to boost and strengthen its capital base.

“And to allow RCBC to capture growth opportunities in line with their strategic initiatives even in a challenging economic environment,” he added.

The notes have a maturity of 10 years from issue date, with a call option at the end of the fifth year and subject to a step-up interest rate feature. RCBC may redeem the notes in whole, but not in part, at 100 percent of the principal plus accrued and unpaid interest at the end of the fifth year, subject to approval of the Bangko Sentral ng Pilipinas (BSP).

Lower Tier 2 capital is supplementary capital structured as interest-bearing notes with a limited tenor of at least five years. The notes are subordinated to the claims of the bank’s depositors and senior creditors but senior to its equity shareholders.

Standard Chartered Bank is the sole arranger, bookrunner and market-maker for this issue. Multinational Investment Bancorp., BDO Capital & Investment Corp. and Citicorp Financial Services and Insurance Brokerage Philippines Inc, together with Standard Chartered Bank, were appointed selling agents. RCBC is also a limited selling agent for the transaction.

“We planned that lower Tier 2 issue just in case loan portfolios deteriorate this year,” Tan told The STAR.

Tan said that the bank’s capital adequacy ratio (CAR) stood at 18 percent at the end of September 2008. “With the issue, our CAR will increase to at least 19 percent,” he added.

The Bangko Sentral ng Pilipinas (BSP) requires a minimum CAR 10 percent for all banks, while the Bank for International Settlements (BIS) wants an average eight percent for all banks globally. The BIS is perceived as the central banks of all central banks.

The commercial bank of the Yuchengco Group of Companies reported a 32.9-percent decline in consolidated net income, or from P3.21 billion in 2007 to P2.15 billion last year. Principal factor for the income decline was lower treasury gains.

“2008 was a challenging year as interest rates spiked in July 2008. We also locked in our gains early in 2007 because of expected volatility in 2008. The strategy gave us our 56-percent increase in net income in 2007,” Tan said.

Tan pointed out nonetheless that core earnings from lending and fee income activities continue to grow.

Interest income from loans grew by 13.6 percent on aggressive expansion of its loan portfolio in the various market segments.

Total consolidated resources grew by 12 percent to P268 billion last year while deposits grew to P196.23 billion, from the P175.92 billion in 2007.

Total net loans and receivables increased by 40 percent, from P117.19 billion in 2007 to P164.41 billion last year. Loans of RCBC Savings Bank, which are predominantly consumer loans, grew by 20.4 percent.