Rizal Commercial Banking : RCBC 2020 Annual and Sustainability Report

ABOUT THE THEME

"A diamond is forever." The precious stone achieves its perfect cut and clarity over the course of time.

Much like RCBC.

In 2020, the COVID-19 global pandemic upended lives and highlighted the interconnectedness of people and businesses. It took place just when we were celebrating RCBC's diamond anniversary.

Like in many other crises we have overcome, we have emerged stronger than ever, toughened by time, and strengthened by the partnerships we have forged.

Much like the diamond.

Our 2020 Annual and Sustainability Report chronicles our continuing journey to achieve sustainability and staying power as a bank that is built to last for a lifetime.

BUILDING PARTNERSHIPS TO LAST A LIFETIME

The COVID-19 global pandemic has changed our view of the present and the future. Some business models may no longer work, while opportunities may arise in new ways of doing things.

In this new milieu, any responsible institution would need to look into the future through a different set of lenses while remaining focused on goals to build a sustainable world.

Our 2020 Annual and Sustainability Report is of unique importance as we take stock of the impact of COVID-19 on our business and our operating environment, as well as on our employees, customers, suppliers, and the community. The outbreak has laid bare the importance of managing material social risks and opportunities among our key stakeholder groups. RCBC's response in relation to these matters is discussed at length in this report, in addition to our financial, economic, and environmental performance.

This 2020 Annual & Sustainability Report was designed in accordance with the following guidelines:

• Checklist of Bangko Sentral ng Pilipinas (BSP) Requirements in the Submission of Financial Audit Report (FAR), Annual Audit Report (AAR) and Reports Required Under Section 7 of Circular No. 410;
• BSP Circular 1085 which mandates banks to adopt a Sustainable Finance Framework;
• Sustainability Reporting Guidelines for Publicly Listed Companies under the Securities and Exchange Commission Memorandum Circular No. 4 Series of 2019; and
• RCBC's Sustainable Finance Framework, which articulates our strategy to deploy Sustainable Financing Instruments to fund loans and projects that have clear environmental and/or social benefits. Under this framework, RCBC is required to annually report the allocation and the aggregated impact of the net proceeds of our Eligible Green and Social Portfolio. This will enable investors to see the positive impact of our sustainable financing activities.

This report also references the United Nations Sustainable Development Goals (SDGs) wherever applicable. The relationship between the related sections and the SDGs are marked with SDG icons throughout the Report.

Scope of the Report

This report's content and scope are based on our primary business areas and sustainability-related initiatives undertaken in RCBC Plaza in Makati City, A.T. Yuchengco Centre in Taguig City, in our subsidiaries and associate offices, and in our 447 branches nationwide between January 1, 2020 and December 31, 2020. While the figures in the employees' section of the Report are inclusive of our branch personnel, the Report's scope does not include the impacts stemming from our overseas operations, joint ventures, or suppliers. The economic value tables, including audited financial statements, reflect consolidated figures.

Feedback and Access

As part of our ongoing efforts to engage stakeholders and to improve our reporting performance, RCBC welcomes your feedback. You may reach us at:

An electronic version of this Report is available at:

https://www.rcbc.com/annual-reports

26 OUR APPROACH TO SUSTAINABILITY

1. Our Approach to Sustainability

1. Our Stakeholders

ECONOMIC CONTRIBUTIONS

34 Economic Contributions

ENVIRONMENTAL CONTRIBUTIONS

52 Environmental Contributions

SOCIAL CONTRIBUTIONS

64 Social Contributions

CONTRIBUTING TO SUSTAINABLE DEVELOPMENT

THROUGH OUR PRODUCTS AND SERVICES

80 RCBC and the UN Sustainable

Development Goals

88 STANDARD SECTIONS

90 Risk Management

1. Corporate Governance

1. Board of Directors

1. Senior Management

1. Senior Officers

1. RCBC Subsidiaries Senior Officers

1. Branch Directory

1. Rizal MicroBank Branch Directory
2. Subsidiaries and Associates
3. Products and Services

1. Shareholders' Information

239 AUDITED FINANCIAL STATEMENTS

Our Business at A Glance

VISION

To be the most admired and trusted profitable financial services group providing and adapting to customers' changing needs - for every Filipino worldwide - through innovative products, excellent service and a highly motivated, committed and impassioned team.

MISSION

We are a leading universal bank, providing quality Integrated Financial Services that best meet our clients' needs. We are committed to conducting our business with utmost integrity, excellence, and commitment as responsible corporate citizens; and, providing professional growth opportunities to develop a talented base of officers and employees, and achieving the best returns for our stockholders.

OUR BUSINESS AT A GLANCE

Rizal Commercial Banking Corporation (RCBC) started as a development bank in 1960 and grew to become one of the largest universal banks in the Philippines. As of end-2020, it has total resources of Php772 billion, including its subsidiaries and affiliates.

Clientele Base

As a diversified financial services institution, RCBC serves corporate and individual banking needs, providing a wide range of financial services to its customers through its retail and investment bank, microfinance unit, foreign exchange brokerage house, leasing company and overseas remittance tie-ups. In synergy with SunLife GREPA Financials (SLGFI) and Malayan Insurance Company, Inc. (MICO), RCBC also offers investment- linked life insurance products, auto, fire, personal accident, and other non-life insurance products.

Delivery Channels

RCBC has an extensive network of 447 branches and operates from its corporate headquarters in Makati City, Philippines. In addition to its strategic branch locations, its traditional delivery channel, the Bank serves customers via its 1,426 ATMs all over the country, through the internet, and mobile banking (IOS and android applications).

It also serves the country's microenterprise and small business operators, as well as value chain players in the agricultural sector, through its microfinance arm, Rizal MicroBank, which operates in key areas in Luzon, Visayas and Mindanao with a total of 16 branches and two micro-banking offices.

Business Model

RCBC derives its funding from customer deposits, which account for nearly 69.4% of its total resources. This is supported by other borrowings at 17.5% and capital at 13.1%. Its main source of revenue is from its lending business, which account for 63.6% of total resources. RCBC lends to corporations and individuals. Net interest income comprises 69.3% of its total operating income, while other income accounts for 30.7% of the balance. The Bank also earns income from other financial services and activities by charging fees or earning commissions, and trading income from proprietary trading activities.

Ownership

RCBC is majority-owned by the Yuchengco Group of Companies (YGC), one of the oldest and largest conglomerates in Southeast Asia covering over 60 businesses. YGC businesses include Malayan Insurance (non-life insurance), SunLifeGREPA Financial, Inc. (life insurance joint venture with Sun Life Financial Philippines); EEI Corp. (construction); educational institutions, and vehicle dealerships. Aside from YGC, RCBC's other significant investors include the World Bank's International Finance Corporation and Cathay Life Insurance Co., Ltd., a wholly owned subsidiary of Cathay Financial Holding., Ltd.

Awards and Recognitions in 2020

RCBC employs best practices and has garnered several awards and recognitions for various areas of its banking operations and innovations, as follows:

• The Asset ESG Corporate Awards: Best Practice
• The Asset Asian Awards: Best Issuer for Sustainable Finance
• The Asset Asian Awards: Best Sustainability Bond Philippines
• Asian Banking & Finance Awards-Wholesale Banking Awards 2020: Philippines Domestic Initiative of the Year for Sustainable Financing
• Global Banking & Finance Review 2020: Best Green Bank Philippines
• Morgan Stanley Capital International (MSCI) ESG Ratings: Upgraded to "AA" rating from "A" - Leader ESG ranking (MSCI ESG ratings of AA and AAA).
• Annual Alpha Southeast Asia Best FI Awards: Best Digital Bank in the Philippines
• Asiamoney: Best Digital Bank in the Philippines
• The Global Economics Limited: Most Innovative Internet Banking Service Provider
• CFA Society Philippines: Best Managed Peso Balanced Fund
• Association of Marketing and Communications Professional (AMCP): Platinum for Creative Effectiveness and Gold in Digital Marketing
• Triple A Asia Infrastructure Awards 2020: Transport Deal of the Year
• 11th Annual Trailblazer Summit and Awards: Best Credit Card Initiative in Asia
• The Asset Country Awards: Best Capital Bond
• 2020 Global Retail Banking Innovation Summit & Awards: Winner, Loan Offering of the Year for the Bayanihan Balance Conversion Program
• 2020 Global Retail Banking Innovation Summit & Awards: Winner, Best CSR Initiative for the COVID-19 Relief Efforts Rewards Donation Program
• Retail Banker International Asia Trailblazer Summit and Awards: Winner, Best Credit Card Initiative
• Retail Banker International Asia Trailblazer Summit and Awards: Best Social Media Marketing Campaign - Highly Commended
• Asia-PacificEnterprise Award: Most Inspirational Brand, Financial Services Category
• Asia IOT Business Platform: 2020 Enterprise Innovation
• International Innovation Awards: Best Digital Financial Inclusion Initiative

Corporate Citizenship

Beyond the bottom line, RCBC is also committed to uplifting the quality of people's lives through its corporate social responsibility (CSR) and environmental sustainability programs. Through the AY Foundation, the CSR arm of the YGC, RCBC helps rehabilitate calamity-stricken areas, bankrolls projects on sustainable livelihood, and grants educational scholarships for the youth.

Message from the Chairperson

HELEN YUCHENGCO DEE

Chairperson

DEAR SHAREHOLDERS, CUSTOMERS, COLLEAGUES, AND PARTNERS:

In the 60 years that RCBC has been in business in the Philippines, we have experienced many triumphs and trials. The arrival of COVID-19 in 2020, however, tested our strength like never before.

As COVID-19 swept across the globe, it induced both a health crisis and an economic crisis. Like the rest of the world, the Philippine economy suffered a heavy blow, ending the year with a -9.5% in GDP and reversing its 84 consecutive quarters of growth.

While the government imposed one of the world's strictest lockdown measures, the country continues to see an increase in the number of coronavirus infections to this day. As a result, consumer spending is at its slowest and unemployment has reached a 15-year record high of 10.3%, equivalent to 4.5 million Filipinos without jobs.

Compounding our country's challenges with the global pandemic were the eruption of Taal volcano in January 2020, followed later in the year by three strong typhoons that caused massive destruction to lives, property, and agriculture.

But while 2020 was fraught with challenges, all is not lost.

For one, it made us a more purpose-driven organization. We had to quickly adapt to the rapidly evolving situation to continue to serve our customers while safeguarding our staff and supporting our business partners.

Throughout the year, the health and wellbeing of our employees became our paramount concern. Their tremendous resilience and flexibility allowed us to minimize disruptions to our banking operations and address the needs of our customers, especially those affected by the pandemic. In the face of very trying circumstances, our people made it possible for us to quickly adapt to the changing market environment and operating conditions while finding safe and efficient ways of working.

Technology has also enabled us to go the extra mile and step up to the challenges that the pandemic has brought to our local communities. An example is the Social Amelioration Program cash disbursement. To augment the government's efforts in reaching out to eligible families affected by the lockdown, we rolled out our ATM Go, our massive digital disbursement platform, so our payout partners in the countryside can distribute the emergency cash subsidy quickly. This dramatically sped up disbursements to over 350,000 households among the poor and vulnerable sectors. Beyond demonstrating the digital capabilities of RCBC, this also gave us the opportunity to contribute in the national effort and celebrate the bayanihan spirit.

The Yuchengco Group of Companies (YGC), to which RCBC belongs, mobilized its resources as quickly, efficiently, and continuously as possible to help the country overcome the challenge of the pandemic. Through our AY Foundation, we locked arms with the private sector and the Philippine Disaster Resilience Foundation (PDRF) for Project Ugnayan to help poor families economically displaced by ongoing community quarantine restrictions. Through the project, over a million households in Metro Manila were given grocery vouchers.

These initiatives did not happen overnight. A tremendous amount of work took place before the pandemic to build partnerships and position us for success. These partnerships have been key to our ability to respond to the pandemic with strength, flexibility, and persistence and will be vital to our work to create a stronger, more sustainable, and more unified RCBC.

Building a partnership that endures is all about forging strong relationships based on trust. Being a trusted financial institution enables us to collaborate with our employees, our business partners, and local communities.

We are not out of the woods yet. There is a resurgence of the virus in our communities. Meanwhile, all the challenges we normally face are still here, from navigating the "New Normal" to retaining and re-tooling a first-class workforce that will ensure RCBC's future.

Now, more than ever, we need to work together to get us through the worst of this pandemic. We need to help each other adapt to the new realities that we now face.

Like a diamond perfected through intense pressure, RCBC has gone through difficult times such as this pandemic, which fell on the year we celebrated our 60th anniversary. Like this precious stone, the more we are polished and hardened by time, the stronger we become.

With the support from our RCBC family - our Board of Directors, our Senior Management team, and our employees - we will continue to forge more partnerships, leaving a little sparkle wherever we go, ultimately making the world a brighter, better place for us all.

We look forward to building partnerships that last a lifetime with you.

Report of the President and CEO

OUR GOLDEN HOUR

EUGENE S. ACEVEDO

President & Chief Executive Officer

"Now, more than ever, we need to be the best partner in every role we play: the best bank for our customers, the best employer for our people, the best partner for government organizations, and the best corporate citizen for our country."

In a year marked with unprecedented challenges, one of the important things we did was to launch a new campaign that articulates what sustains our business. The campaign - "Partners through Generations" - draws upon the strong relationships and partnerships we have built over the last 60 years and passed onto future generations.

This has never been truer in the context of today's changing world. We were all reeling from the eruption of Taal volcano and the strong typhoons that hit our country when COVID-19 arrived and brought untold hardships. Now, more than ever, we need to be the best partner in every role we play: the best bank for our customers, the best employer for our people, the best partner for government organizations, and the best corporate citizen for our country.

This pandemic puts banks on the frontline. Unlike in the previous crises, we have now become part of the solution rather than the cause. Businesses across the world, large and small, depend on credit, as strict lockdowns have forced them to shutter their doors to customers and employees. Consumers rely on contactless channels so they can still meet their basic necessities even from the safety of their homes. The poorest and the most vulnerable sectors of society cling on to financial aid as a lifeline.

This is the time for us to show our strength and capabilities. If we must pass on a stronger world to the generations that follow, we must face this battle together as one.

Ensuring continuity and recovery

When the pandemic started, employees immediately looked to their leaders for direction. We did our best to communicate with clarity, authenticity, and care. We were tactical, too, in our approach.

We activated our Pandemic and Infectious Disease Plan to manage the impact of the pandemic to our people and our business. We enforced health and safety protocols to protect our RCBC bankers, especially those in our branches.

We moved with extreme agility to minimize business disruptions as well as transform the way we work. We shifted to Work from Home mode and virtual meetings while ensuring that our IT infrastructure can support these. We deployed skeleton teams into key locations and activated our business continuity sites. We also mobilized our resources to allow nearly half of our branches in Metro Manila and Luzon to continue serving clients even during the Enhanced Community Quarantine (ECQ). We rationalized our branch network by consolidating 60 Metro Manila and provincial branches as foot traffic declined and as customers shifted to digital platforms.

For customers severely affected by the pandemic and may take time to recover, we launched the COVID Assistance and Recovery (CARE) Program as a pre-emptive refinancing of their loans. After all, it is in our best interest that they survive and thrive. We started by engaging them in frank conversations, and we adjusted loan payment terms based on realistic business expectations. As of end-2020, Php78.7 billion of these loans were placed under CARE. To manage the higher risks and preserve our asset quality in the event of a continuous economic downturn, we set aside Php9.4 billion in loan loss provision, 2.5 times higher than the normalized provisions in the previous year.

Taking on the battle

After putting all our defenses in place, we unleashed our arsenal of digital solutions to continue winning the hearts and minds of our customers.

This is a battleground we have been preparing for. Before the ECQ, we already established a Board-approved Digital Committee in February 2020 to enable us to provide essential services to our clients during the lockdown, assist in distributing state subsidies, and even cater to the unbanked which are usually the most vulnerable to the pandemic. We also fortified our IT infrastructure to accommodate the heavy influx of people turning to online banking and contactless channels.