Rating Action: Moody's assigns Ba3(hyb) rating to RCBC's proposed Additional Tier 1 capital securities
Singapore, August 18, 2020 -- Moody's Investors Service has today assigned a Ba3(hyb) rating to Rizal Commercial Banking Corporation's (RCBC) proposed US dollar, perpetual, non-cumulative and subordinated Additional Tier 1 (AT1) capital securities.
The Ba3(hyb) rating of the proposed AT1 issuance is three notches below the bank's Baseline Credit Assessment (BCA) and Adjusted BCA of baa3, reflecting Moody's assessment of higher expected losses in light of (1) a mandatory and/or discretionary coupon suspension on a non-cumulative basis, (2) the contractual principal write-down feature, and (3) the issuance's subordinated claim in liquidation.
The AT1 securities are contractual non-viability preferred securities. The securities are perpetual, with a first call date in 2025. In liquidation, they rank senior only to ordinary shares. Coupons can be cancelled on a non-cumulative basis at the bank's discretion. Coupon skip is mandatory if distributable profits are insufficient, applicable regulatory capital requirements are breached or at regulatory discretion. In the event of a coupon skip, dividends on common shares must also be stopped.
The proposed issuance also contains a clause mandating a permanent write down of the principal in the event that the bank becomes non-viable as defined in the terms and conditions.
The rating on the AT1 securities could be upgraded if Moody's upgrades RCBC's baa3 BCA and Adjusted BCA. The BCA could be upgraded if there is an improvement in its profitability and capital while maintaining asset quality at current levels.
Conversely, Moody's could downgrade the rating on the AT1 securities if RCBC's baa3 BCA and Adjusted BCA are downgraded. RCBC's BCA could be downgraded if (1) there is a meaningful decline in RCBC's asset quality, along with indications that it will remain weak for some time; or (2) its capital buffers fall materially.
The principal methodology used in this rating was Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Rizal Commercial Banking Corporation (RCBC), headquartered in Manila, reported total assets of PHP 767 billion as of 31 December 2019.
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This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
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Srikanth Vadlamani VP - Senior Credit Officer Financial Institutions Group Moody's Investors Service Singapore Pte. Ltd. 50 Raffles Place #23-06 Singapore Land Tower Singapore 48623 Singapore JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Graeme Knowd MD - Banking Financial Institutions Group JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Releasing Office: Moody's Investors Service Singapore Pte. Ltd. 50 Raffles Place #23-06 Singapore Land Tower Singapore 48623 Singapore JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077
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