MANILA, Philippines -- The Philippine National Bank (PNB), the banking arm of tobacco magnate Lucio Tan, has obtained approval from the central bank to offer P5.0 billion worth of high-yielding long-term deposits to the public.

PNB disclosed the Bangko Sentral ng Pilipinas's approval to the Philippine Stock Exchange on Monday.

PNB, the country's fifth largest commercial bank, plans to issue the long-term negotiable certificates of deposits (LTNCDs) within the first semester.

Individual investors get the interest coupon tax-free if they hold the LTNCDs to maturity compared to the local central bank's special deposit account (SDA) and government securities, which are subject to the 20 percent withholding tax.

Unlike regular deposits, banks are able to offer higher yields on LTNCDs because funds raised from these are exempt from the reserve requirement.

PNB recently exercised a call option on P3.0 billion in subordinated or tier 2 notes prior to maturity in 2015 to avoid an increase in debt servicing fees.

A call option gives the issuer the right but not the obligation to buy the security at a specified price within a specified time period.

PNB is set to merge with Allied Bank, also owned by Tan, within the year.

The bank expects to post a 15-percent increase in net profits this year despite costs from its integration with Allied Bank. Growth is expected to be supported by at least a 10-percent expansion in loans.