SMC banking prospect to raise additional P5B
By Doris Dumlao
Philippine Daily Inquirer
First Posted 21:12:00 07/13/2008
Filed Under: Economy, Business & Finance,Banking
BANK OF COMMERCE PLANS to raise another P5 billion sometime in the last half of the year through a combined offering of subordinated notes and hybrid debt paper.
The bank is reportedly being groomed to be the banking arm of food and beverage giant San Miguel Corp.
In a recent interview, Bank of Commerce president Raul de Mesa said that, on top of the additional P2 billion to be pumped in by SMC, the bank was preparing for additional fundraising to boost its total capital structure to P15 billion.
Proceeds from the planned subordinated notes offer would qualify as tier 2, or supplementary capital, while those from hybrid notes would be eligible as tier 1, or core capital.
Hybrid tier 1 instruments have equity-like features that would make them acceptable as capital. They may be in the form of unsecured subordinated debt or preferred shares with interest rate step-up feature.
“We’ll use [the proceeds] to expand geographically,” De Mesa said. “We’ll adopt a new business model and it’s going to be a slightly different model, outside of the traditional brick-and-mortar model.”
He added that the bank had a business plan, “but that was limited by the size of our capital.”
“We have to revisit that plan because we now have expanded liquidity,” De Mesa said.
SMC is set to double its stake in BOC from P2 to P4 billion, which will increase its interest to 51 percent, from the 34-percent stake it held at the end of last year, De Mesa said.
SMC has already infused the first installment of P500 million in additional equity and will disburse the rest once the Bangko Sentral ng Pilipinas has approved the petition to increase BOC’s authorized capital, he said.
The capital-raising exercises are expected to beef up the bank’s capital adequacy ratio to about 18 percent by year’s end, up from 12 percent in 2007.
By expanding its commercial banking operations, BOC hopes to engage in nonallied activities like insurance and property development.
In particular, it wants to get into bancassurance, or the selling of insurance products through banks.
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