Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Debt Capital Markets

Rizal Commercial Banking / Debt Capital Markets

There are several disconcerting issues pertaining to <a href="https://www.smartkarma.com/entities/rizal-commercial-banking-corp" target="_blank" data-smartkarma-citation="entities:23143:1" rel="noopener">Rizal Commercial Bank (RCBPM)</a> which potential investors need to gain comfort regarding in advance of its inaugural US$-denominated Additional Tier 1 (AT1) bond.The issues, besides the obvious Covid-19 related impacts, are the gap to possible restrictions on AT1 coupon payments and any potential liability relating to the unauthorized transfer of funds from the Bank of Bangladesh in 2016. Answers to each of these items are currently unknown. Note that we assessed Rizal's related-party exposure in <a href="https://www.smartkarma.com/insights/philippine-banks-a-related-party" target="_blank" data-smartkarma-citation="insights:41194" rel="noopener">Philippine Banks: A Related Party</a>. With a baa3 rating as its lowest fundamental credit score, an AT1 issue from RCBPM is likely to be rated at Ba3 / BB-. Comparatively rated US$-AT1 bonds with four to six years until first call date offer a yield to first call in the range of 5.9% to 8.4%.  Given the known unknowns relating to Rizal, we believe investors should demand a higher yield as compensation.

There are several disconcerting issues pertaining to Rizal Commercial Bank (RCBPM) which potential investors need to gain comfort regarding in advance of its inaugural US$-denominated Additional Tier 1 (AT1) bond.The issues, besides the obvious Covid-19 related impacts, are the gap to possible restrictions on AT1 coupon payments and any potential liability relating to the unauthorized transfer of funds from the Bank of Bangladesh in 2016. Answers to each of these items are currently unknown. Note that we assessed Rizal's related-party exposure in Philippine Banks: A Related Party. With a baa3 rating as its lowest fundamental credit score, an AT1 issue from RCBPM is likely to be rated at Ba3 / BB-. Comparatively rated US$-AT1 bonds with four to six years until first call date offer a yield to first call in the range of 5.9% to 8.4%.  Given the known unknowns relating to Rizal, we believe investors should demand a higher yield as compensation.

Rizal Commercial Bank: The Known Unknowns in Advance of Its AT1 Issuance

United Kingdom

Lloyds Banking Group plc, through subsidiaries and associated companies, offers a range of banking and financial services. The Company provides retail banking, mortgages, pensions, asset management, insurance services, corporate banking, and treasury services.

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Lloyds Banking Group (LYG US)

Rizal Commercial Bank: The Known Unknowns in Advance of Its AT1 Issuance

There are several disconcerting issues pertaining to Rizal Commercial Bank (RCBPM) which potential investors need to gain comfort regarding in...

Hank Calenti, CFA

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