P1B fine unlikely to weaken RCBC’s financial profile – Fitch

MANILA, Philippines – The P1-billion penalty imposed on Rizal Commercial Banking Corporation (RCBC) for being a channel in the Bangladesh Bank heist is unlikely to weaken the bank’s financial profile, said US-based rating agency Fitch Ratings.

“The P1 billion fine related to a money-laundering case earlier this year is unlikely on its own to materially weaken the bank’s medium-term financial profile, despite being significant relative to its net income,” Fitch Ratings said in a statement on Tuesday, August 9.

The P1-billion penalty is equivalent to about 20% of RCBC’s 2015 net income.

Despite this, Fitch Ratings said it believes that “RCBC will continue to strengthen its operational policies and controls to avoid similar incidents in future.”

The RCBC fine is also the largest ever imposed by the Bangko Sentral ng Pilipinas. (READ: Italy cracks down on Philippine remittance agencies)

“We believe this demonstrates the regulator’s firm view of the seriousness of the incident,” Fitch Ratings said.

The laundering of the $81-million stolen funds from the account of Bangladesh Bank in New York will not be possible without the money transfers from a registered remittance company PhilRem Service Corporation through RCBC. 

A billion pesos fine a ‘one-off’

For Fitch Ratings, the P1-billion fine is a “one-off.”

“We expect RCBC to remain profitable in 2016. The charge on its own does not significantly weaken the bank’s medium-term profitability or its existing capital, funding and liquidity strengths,” the rating agency said.

In the agency’s view, what could affect the bank’s rating is a loss of key correspondent banking relationships, which appear to have been averted since the details of the became public in the first quarter of 2016.

Fitch Ratings said BSP has “acknowledged RCBC’s efforts to improve its anti-money laundering risk management systems and governance” in imposing the P1-billion fine.

“We expect such efforts to continue, which should help to strengthen both RCBC and the banking sector,” the agency added.

RCBC said in an earlier statement that the fine will be “paid in two equal tranches over a one-year period, P500 million upon approval by the Monetary Board and P500 Million one year after.”

The scandal has rocked the Yuchengco-led bank and led to the resignation of RCBC President and CEO Lorenzo Tan as well as RCBC treasurer Raul Victor Tan. The bank also reorganized its board, increasing the number of independent directors to 7 from the previous 4.

While RCBC saw its stock plunge immediately after the scandal came to light, the bank has since recovered, posting a net income increase of P2.61 billion for the first half of the 2016.

Early this month, RCBC received from Fitch Ratings an upgrade on its long-term issuer default rating to BB+ from BB, and on its viability rating to BB+ from BB. The upgrade reflects the strong financial standing of RCBC. – Rappler.com