RIZAL COMMERCIAL Banking Corp. (RCBC) expects to post net income growth for the rest of the year on the back of better margins as the Bangko Sentral ng Pilipinas (BSP) continues to cut benchmark interest rates.
“The consumer portfolio is a long portfolio. You fix the portfolio for five to 15 years, so when rates come down, the spreads widen on a one-to-one basis. Our portfolio is more long-term fixed. We were able to book a lot when interest rates were high, so we should be able to enjoy the lower funding costs,” RCBC President and Chief Executive Officer Eugene S. Acevedo told reporters on the sidelines of the Yuchengco Group of Companies Forum 2024 on Thursday.
“Our funding base is 50-50 low cost, high cost. So, whenever interest rates are high, our margins shrink compared to the big banks. But when interest rates start coming down, the margins start widening,” he added.
RCBC’s net income declined by 12.97% year on year to P2.25 billion in the second quarter due to increased tax expenses. In the first half, its net profit stood at P4.45 billion, 28.47% lower than the P6.22 billion booked in the same period last year.
The BSP’s policy-setting Monetary Board on Aug. 15 slashed its policy rate by 25 basis points (bps) to 6.25% from a near 17-year high of 6.5%, marking its first easing move in nearly four years.
BSP Governor Eli M. Remolona, Jr. has said they could cut rates by another 25 bps within the year. The Monetary Board’s remaining policy-setting meetings this year are on Oct. 17 and Dec. 19.
Mr. Acevedo said he expects the Monetary Board to reduce benchmark interest rates by 25 bps again before yearend, as signaled by Mr. Remolona. “I’m hoping that there’s going to be another 25-bp cut, plus another one if the US does it faster.”
The US Federal Reserve is widely expected to start its own easing cycle by September. Markets have fully priced in a 25-bp rate cut from the Fed next month, with a 34.5% chance of an outsized 50-bp reduction, according to the CME FedWatch tool, Reuters reported.
Investor bets for imminent US rate cuts were further cemented by Fed Chair Jerome H. Powell’s remarks at Jackson Hole last week that the “time has come” to cut rates, joining a chorus of Fed policy makers who have signaled the same in recent times.
RCBC’s bottom line will also be supported by its core businesses’ growth as the bank aims to further expand its retail loan portfolio, Mr. Acevedo added.
“The important thing is that our net interest income, which is core, has been growing at about 29%. I think it’s best because we had a lot of one-offs before, but the crucial thing to think about is our net interest income is growing at almost 30%. So expect that to continue,” he said.
RCBC aims to eventually have retail loans making up 45-50% of its total loan portfolio from the current 30%, he added.
“Expect more retail growth. Expect more data science-driven sales. Expect more of SME (small and medium enterprises) as well, because that’s our second focus. So basically, high-growth areas growing between 20% and 50%. From a credit card standpoint, I think we’re growing between 55% and 58%. But it’s been over 50% in the second year. It’s quite impressive, actually,” Mr. Acevedo said.
RCBC’s shares declined by 3.36% or 75 centavos to end at P21.55 apiece on Thursday. — A.M.C. Sy with Reuters
