February 11, 2014

RCBC nets P5.3b for 2013

In a disclosure to the Exchange yesterdat, Rizal Commercial Banking Corp. (RCB, Buy) reported a 2013 net income of P5.3b, 14.6% lower YoY on lower trading gains. Revenues, excluding trading, were up 26.7% to P20.3b. The bank grew its net interest income by 17.4% to P11.4b and improved its net interest margin to 4.25%. This was driven by the 25% growth of its loan portfolio to P237.9b.

Loan growth was sustained across market segments but the rise was more pronounced in the consumer sector (+22%) and SMEs (+34%). The bank’s NPL ratio also improved to 1.06% as of end-2013 from 1.86% in 2012. The bank also grew its CASA deposits by 31% to P184.5b, driving an improvement in the bank’s funding mix with CASA deposits now accounting for 62% of total deposits. RCB also posted a CAR of 16.5%, Tier 1 Ratio of 16.0% and CET1 Ratio of 11.1% -- all above regulatory thresholds.

Our Take: Despite the impressive balance sheet growth, RCB’s 2013 net income fell below consensus estimates of P6b. We believe that the shortfall can be traced to weaker than expected trading gains. Nonetheless, we think that RCB can perform well in a rising interest rate environment if it can maintain net interest income growth by sustaining rapid loan growth, preferably in the consumer and SME sectors, and maintaining above-industry margins. – WealthSec