The Market Monitor Minding the Nation's Business
By Riza Lozada
The backlash of the cyber heist on Rizal Commercial Banking Corp. (RCBC), where the $81 million stolen from Bangladesh’s central bank was believed to have been deposited, has badly hurt the share prices of the local bank, prompting its owners to shore up its stock.
RCBC’s two biggest shareholders have bought an extra P445.6 million worth of stocks, taking their combined stakes to 65.02 percent. At the same time, they offered to buy out shareholders who wanted to buy out major investors who indicated their desire to exit.
The Senate investigation of the heist continues, in the meantime, with the congressional probers determined to get to the bottom of the scandal, particularly how the huge amount, hacked from the New York deposits of the Bangladesh Bank, found its way to RCBC and who were involved in it.
RCBC’s top shareholder—the Pan Malayan Management and Investment Corp. of taipan Alfredo Yuchengco—bought last week 8.8 million shares at P30 each, raising its stake to 42.31 percent from 41.68 percent.
Taiwan’s Cathay Life Insurance, a subsidiary of Cathay Financial Holding Co. Ltd., the second-biggest RCBC shareholder, bought 5.8 million shares, also at P30 each, raising its stake to 22.71 percent from 22.3 percent. The price of RCBC shares fell to as low as P28.75 last month after the bank was placed under investigation.
The stock fell by as much as 3.8 percent to 30.70 in Wednesday morning’s trade, versus a 0.6-percent decline in the broader market.
Last Thursday, RCBC closed at P31.50 per share, significantly lower than the P45.70 per share a year ago.
“The principals are very confident of the bank. They used their cash to buy out investors that wanted to exit,” First Metro Asset Management President Augusto Cosio said.
Cosio added that RCBC’s reputation may have suffered from the heist, but its balance sheet remained attractive, given its clients and depositors.
A Cathay Financial spokesman told Reuters it was “confident in (RCBC’s) chairman and management team.”
“The Philippines’s market is booming. It is only one of its branches that is being investigated. And RCBC is fully cooperating with investigators,” the spokesman said.
Equity analysts said major shareholders were busy last week trying to salvage the bank’s battered valuation amid the money-laundering controversy.
Lexter Azurin, head of research at Unicapital Securities Inc. said the recent moves of RCBC’s shareholders in boosting their respective interests in the bank were mainly meant to support the bank’s already battered share prices.
“The buying of more shares tells you that, in a way, major shareholders are supporting RCBC share prices at this level.
It has been undervalued and it is now trading well below its fair value,” Azurin said. However, he noted that profit-taking spoiled major stockholders’ aim at strengthening its share prices.
“The increase in share prices was not as significant as it should have been because it [movement in price] was a combination of buying and profit taking,” he said.
He said that with the recent high at P33 from the trading low of P28.75 a few weeks ago, investors took advantage and booked gains after RCBC’s stock price shot up during the week.
He further explained that except for its ongoing crisis, the bank’s fundamentals would point toward profitability in favor of the stockholders.
“Given RCBC valuation at present, long-term investors may start buying RCBC shares. The strong fundamentals are there, it has just been battered by the recent Senate investigation,” Azurin said.
Azurin also said he expected the fallout from the heist and the money-laundering investigation that RCBC is facing to have “only a short-term impact” on its financial position, given its strong performance last year. Last year, RCBC’s earnings grew by 15 percent to P5.1 billon, from the P4.4 billion it posted in 2014.
“Moving forward, it [RCBC] is a good investment, and it is now at an attractive price level. Thus, for long-term investors, it is now time to accumulate RCBC shares,” he added.
Luis Limlingan, business development head at Regina Capital Development Corp., said that since RCBC’s book value is at P45 and the shares are now trading at the P31.50-level, RCBC shares have become “very cheap.”
He said that prior to the scandal, Regina Capital recommended the buying of RCBC shares to its clients. “There was selling pressure after the [money-laundering] scandal broke out.
Limlingan said RCBC’s share prices and analysts view on the stock would depend on the outcome of the investigation. “But again, the bank has a strong financial position and its fundamentals are strong,” he said.