Rizal Commercial Banking : Still rock solid

Whatever the public perception is on the issue of money laundering, the Rizal Commercial Banking Corp. (RCBC) remains to be rock solid on its financials.RCBC is the 7th largest privately-owned local bank with over P500 billion ($11 billion) in total assets, over P59 billion in capital funds and a very strong 16 percent capital adequacy ratio (CAR) as of February 2016. The CAR is a measure of a bank's capability to absorb losses. It can be seen as a bank's airbag, similar to those installed in cars to protect us in case of accidents. For RCBC, the 16 percent CAR is much higher than the regulatory requirement of 10 percent.Even the more stringent Common Equity Tier 1 Ratio of the bank is strong at 12.88 percent also exceeding the minimum regulatory requirement (with capital conservation buffer) of 8.50 percent.Over the past seven years, the bank has consistently worked on building financial strength, raising a total of P27.6 billion of capital since 2007 and unloading P4.7 billion of legacy non-performing assets from the Asian crisis.Further fundamentals show that the bank has performed well in 2015 and has a strong balance sheet with non-performing loans (NPLs) at historical lows of 0.79 percent ratio and high NPL coverage 102 percent ratio. Provisions are said to be flat while credit cost was reduced at 0.8 percent.The bank's credit quality and strength was even supported by the recent upgrade of Moody's. In May 2015, RCBC received a rating upgrade to Baa3 (stable) by Moody's Investor Services from Ba2.element-invisibleBusiness ( Article MRec ), pagematch: 1, sectionmatch: 1According to Moody's website, the upgrade of the long-term ratings of RCBC reflects the consistent improvement in the credit profile of the bank, backed by favorable operating conditions in the Philippines.It said that "the upgrade of the bank's BCAs and adjusted BCA to ba1 from ba3 reflects improvements in their asset quality profiles during a period in which new non-performing loans (NPL) formation has remained low in the Philippines. In addition, the bank's capital buffers have improved, following Cathay Life's P7.95 billion investment in new equity of RCBC, which was completed in April 2015."Other rating agencies have likewise recognized the bank's stronger financial with upgrades, such as those by Fitch Ratings and Capital Intelligence in 2013.RCBC has also continued to show its commitment to staying strong for its customers. At the onset, the bank has cooperated with the AMLC and complied with all their requirements. And the bank has given information to the public and the Senate related to the matter within legal limits.RCBC and its officials have apologized for the involvement of their personnel in the money laundering scheme which is now the subject of Senate Blue Ribbon and AMLC investigations. The bank has also vowed to cooperate with these and any subsequent government proceedings within legal bounds.The bank revealed that it is conducting its own inquiry and has engaged the help of SGV auditors and external counsel to help identify and address any weaknesses in its controls and operations which may have facilitated the scheme.Upon the recommendation of the auditors, RCBC said that it will take appropriate action against any bank officer or staff found guilty of fault or negligence, and there may be changes in processes and policies as a result of the investigation.BPOS still driving demandThe business process outsourcing (BPO) industry is still the main driver of the office market in the coming years and given this continued strong demand, more than one million square meters of office space are planned to open in the next two years in major business districts in Metro Manila, according to the latest report from Pinnacle Real Estate Consulting Services.Despite this figure appears high, Pinnacle director for research and consulting Jojo Salas noted that overall vacancy across these business districts is still at a manageable six percent, from five percent at the end of 2015. Overall Grade A and Prime Grade A office stock in Metro Manila is approximately five million square meters, the report said.In its Real Estate Market Insight for the first quarter, Pinnacle Research said big tenants would still have a hard time looking for suitable office, especially if they need contiguous floors. It is still a landlord's market, the report said, thus, the landlords are still the winners in this segment.The report revealed that rents in the Makati Central Business District (CBD) generally held up, where Premium Grade A buildings have a weighted average of P1,280 per sqm per month, Grade A buildings P865 per sqm per month, and Grade BandC buildings, P675 per sqm per month.Pinnacle Research observed that some Grade BandC buildings, and even Grade A buildings are slightly lowering their asking rates due to competition from newer and better stocks in Bonifacio Global City, and other CBDs.The weighted average rent in BGC is P870 per sqm per month while that for Grade A office buildings in Ortigas, Alabang, Quezon City, and Bay Area business districts is estimated at P650 per sqm per month. In Cebu, average Grade A office rent is P500 per sqm per month, while in Davao the average rent is P450 per sqm.According to Pinnacle, much has been said about the fear of property bubble in the residential condominium market and that iven the estimated demand for housing at 5.5 million for this year, it is really a concern of right match of the supply being built vis-a-vis the actual demand.For the residential condominium market, Salas said that what is a more accurate picture is that the residential segment of the real estate market is the most competitive at present since a lot of players have experienced high profitability in recent years.Pinnacle pointed out that given the numerous developments in Metro Manila, the winners in this property segment are the buyers since there are a lot of choices, and financing is relatively easy. Likewise, future tenants of these residential units, especially those units bought as investment, would also be winners, enjoying the available choices as well as the competitive rents, it said.The report added that rents have been generally stable, given the wide range of options in the market. Luxury condominium units command the highest rents that plateaued at P300,000 per month-level for big units of 300 sqm-cut. The typical rental range for luxury two-bedroom and three-bedroom units is between P120,000 to P250,000 depending on the size, location and furnishing. For the luxury and high-end segment, there are limited choices for rent.Pinnacle also revealed that leasing of studio and one-bedroom units is stable and still ranges between P15,000 to P30,000, and may reach the P50,000 per month-level, depending on the location, furnishing, and amenities of the condominium building. It would be worthwhile to monitor the rents of one-bedroom and studio units to evaluate the yields of these "investment units," it said.For comments, e-mail at philstarhiddenagenda@yahoo.com© Pakistan Press International, source Asianet-Pakistan