Local banks are expected to continue raising funds in the coming months to take advantage of low interest rates and long-term financing to support the growth of their portfolios.
The Bangko Sentral ng Pilipinas (BSP) said local banks were looking to lock in deposits by clients to match the longer-maturity loans that were being extended to companies for their big-ticket projects.
“If the loans are long-term, banks have to match the liability terms to their assets. This is all very rational for banks to manage their liability positions,” BSP Deputy Governor Nestor A. Espenilla Jr. said in an interview.
He said deposits, which banks use to lend to borrowers, were relatively risky since depositors could easily withdraw these funds.
As a result, banks are now expected to issue long-term negotiable certificates of time deposits (LTNCD), with maturity of at least five years, Espenilla said.
“There’s more certainty with LTNCDs and there’s strong demand for them because investors are looking for safe outlets with yields that are safe. These are not scams,” he said.
Last month, Eastwest Banking Corp. announced it would issue P5 billion-worth of LTNCDs. This follows a similar transaction by the same bank in November last year.
Lucio Tan-led Philippine National Bank (PNB) completed its own P5-billion LTNCD issuance in July. They were supposed to be offered over three days, but the offer period was cut short after the target amount was raised on the first day.
“We expect banks to continue to be active in managing their liability programs,” he said.
Espenilla said banks were also expected to raise more tier two funds, which were debt-like instruments that were counted as a form of capital for banks.