An official of Rizal Commercial Banking Corp. (RCBC) has a rosy outlook for offshore investments citing “positive developments” for the Covid-19 vaccine.
According to Robert B. Ramos, head of RCBC Trust and Investments Group, pharmaceutical firms producing vaccines with a high rate of effectivity can support the economic recovery and foreign investment markets as well.
“With the recent announcement of Pfizer and BioNtech’s more than 90-percent effective vaccine testing, the market is now seeing the light at the end of the tunnel,” he said. “We also saw quarter-on-quarter improvement in terms of GDP [gross domestic product] on a per country basis globally.”
While economic challenges vary per region or country, Ramos said that corporates should still “grab opportunities to convert their investments to income.”
The bank official, however, said that investors should also consider first the risks involved in acquiring the financial instrument and its value in a specific market moving forward. At the same time, Ramos said that investors must evaluate their cash flow position as well before investing.
Ramos noted as example the clients of RCBC who expressed interest in channeling their funds to offshore investments. These customers usually have excess funds or seeking to diversify their investment portfolios, he explained.
“For our clients who have excess liquidity, there is some interest. I wouldn’t know how big, but they are looking offshore,” he said.
Offshore investments refer to funds invested in various kinds of financial instruments in a jurisdiction outside the investor’s home country. These can be in the form of bonds, stocks, mutual funds, real estate, and life insurance, among others.
Last December 1, Moody’s Investors Service revised the outlook on the rating of RCBC to negative from stable.
“The change in outlook to negative on RCBC’s ratings reflects risks to asset quality, especially in the retail and small and medium-sized enterprise (SME) segments, arising from the coronavirus-induced economic shock,” Moody’s said. “At the same time, the affirmation of its ratings reflect the bank’s capital, which provides a buffer to absorb some level of asset quality deterioration.”
Moody’s said like the Philippine National Bank, RCBC’s profitability is lower than peers and represents a credit weakness.
“The likely deterioration in asset quality on the back of the coronavirus outbreak will impact profitability through elevated credit costs over the next two years.”
Given the negative outlook, an upgrade over the next 12 months to 18 months is unlikely for both RCBC and PNB.
Moody’s said it could change RCBC’s outlook back to stable if asset quality deteriorates only moderately, such that capital remains at current levels while its net NPL ratio stays below 2 percent.
In August, the Yuchengco-led bank introduced its first Additional Tier 1 offshore offering with an initial size of $300 million. The Reg S issuance was priced in at 6.50 percent.
The proceeds of the offering are allocated to finance asset growth and other general corporate matters and to maintain enough reserves above the minimum requirements by the Bangko Sentral ng Pilipinas.
Bulk or 79 percent of the investors that purchased the bonds came from Asia. The balance was accounted for by European accounts.
Credit Suisse was the sole global coordinator and sole bookrunner of the transaction.
Earlier, RCBC launched two local bonds offerings to fund its asset growth, maturing obligations and other general corporate matters.
The bank listed its P7.05-billion fixed-rate bonds in Philippine Dealing and Exchange Corp. (PDEx) in April, noting that a strong demand from investors allowed its offering to be oversubscribed by more than two times.
In July, RCBC listed with PDEx another bond offering whose order book reached P16.6 billion or more than five times the minimum issue size of P3 billion.
The listed bank saw its net income in the first nine months drop by 11.3 percent to P4 billion from P4.5 billion year-on-year due to additional provisions for potential credit losses.