The global credit watcher Fitch Ratings favorably cited the decision of the local lender Rizal Commercial Banking Corp. (RCBC) to sell a portion of its equity structure to a Taiwan-based financial institution, saying the transaction should help the bank improve its balance sheet.
In a statement released on Friday, Fitch Ratings said RCBC should benefit from the proposed investment from Taiwan’s Cathay Life Insurance Co. Ltd. as the insurer succeeds in acquiring a 20-percent stake in RCBC.
“Fitch believes the foreign investment would help RCBC to improve its capitalization, ability and flexibility to expand its balance sheet, and provide cross-selling opportunities,” Fitch said.
“Any meaningful improvements in operational efficiency and corporate governance are likely to materialize only over the longer term,” the credit watcher added.
The transaction—which includes primary common shares of P8 billion and secondary common shares of another P10 billion—is subject to regulatory approval in the Philippines and Taiwan.
Detailed discussions were seen completed within the year.
“The fresh capital of P8 billion would help RCBC significantly to improve its capitalization in the near term and support loan growth,” Fitch said.
Fitch also said that, after the capital injection, RCBC common equity Tier 1, considered the highest form of valid capital under the new Basel 3 rules, would increase to 13.5 percent from the current 10.9 percent as of end-June this year.
Fitch was the second ratings agency to commend the recent investment of the Taiwanese firm in a local bank.
A week earlier, Moody’s Investors Service lauded the investment, saying this was ‘credit positive’ for the local lender.