MICROCAPITAL STORY: RIZAL Commercial Banking Corporation (RCBC) Announces Tentative Plan to Acquire JP Laurel Rural Bank for $8m to Establish Its Microfinance Business

RIZAL Commercial Banking Corporation (RCBC), one of the Philippines’ 10 biggest banks, announced that it will acquire Batangas based JP Laurel Rural Bank for 8 million USD to establish its microfinance business. According to a report from the Manila Times, RCBC said its board of directors approved the establishment of an 8 million USD shareholder advance facility which will be infused over a three year period from 2009 to 2011 in order to acquire JP Laurel Rural Bank. The acquisition will extend RCBC’s penetration into the Batangas, Laguna, and Mindoro Oriental areas where JP Laurel Rural Bank’s branches are located. The rural bank’s particular geographic coverage represents a prime market for achieving RCBC’s strategic goals, which include microfinance. The acquisition decision is still subject to approval by the Bangko Sentral ng Pilipinas (BSP), the central bank of the Republic of the Philippines.

“Looking at business models in other countries including Indonesia and Mexico, we see that microfinance holds a lot of promise both as a profitable financial venture and as a means to assist in the development of small businesses.” “These are some of the reasons why we have decided to finally take this first crucial step in RCBC’s own foray to the microfinance business,” said president and chief executive officer Mr. Lorenzo V. Tan.

At the end of 2008, there were nine microfinance-oriented rural and thrift banks in the Philippines. There were also 221 regular banks with microfinance operations, presenting a combined microfinance loan portfolio of about 138 million USD, according to BSP data (p.11).

RCBC is currently the country’s fifth largest private, local, full service bank in terms of assets and capital. It is a major player in the remittance business for the estimated 11 million Filipinos living abroad, with an overseas presence through subsidiaries and tie-ups in North America, Europe and Hong Kong. As of December 2007, RCBC has total consolidated assets of about 5.1 billion USD. According to the bank’s financial highlights, the organization reported a return on equity of 12.4 percent and a return on assets of 1.4 percent. Its net interest margin increased from 4.8 percent in 2006 to 5.0 percent in 2007.

JP Laurel Rural Bank does not report to the MIX Market, the microfinance information clearinghouse, nor do they maintain a web presence.

By Yanni Hao, Research Assistant

Additional Resources

Business Mirror: “RCBC Ventures into Microfinance”

Bangko Sentral ng Pilipinas: “Home” “2008 Year End Report”

The Manila Times: “Home” “RCBC Plans to Acquire Batangas Rural Bank“

RIZAL Commercial Banking Corporation: “Home” “financial highlights“