MANILA, Philippines?Union Bank of the Philippines, the banking arm of the Aboitiz Group, plans to offer debt notes to generate P5 billion, which will be used as supplementary capital to support the growth of its resources.
The bank disclosed to the Philippine Stock Exchange yesterday that its board had approved the issuance of unsecured subordinated notes. The offering will be done as soon as the bank obtains the approval of the Bangko Sentral ng Pilipinas (BSP), Union Bank president Victor Valdepeñas said.
Classified as ?lower tier 2? capital, the instrument will be packaged as an interest-bearing note, which would be subordinate to the claims of bank depositors and senior creditors.
?We?re preparing it now, but haven?t selected the underwriter. Within this week, we?ve got to select the arrangers before we go to the BSP,? Valdepeñas said in an interview.
He said the tier 2 notes would have a tenor of 10 years with an option for the bank to redeem them on the fifth year. If the bank opts not to exercise the call option, it will have to pay a higher or ?step-up? rate from the sixth year onward.
Valdepeñas said the bank wanted to issue the notes ?as soon as possible? to cope with the fast expansion of its balance sheet.
?Lending has been very strong both on the consumer and corporate side particularly as we get involved in big-ticket items like power and infrastructure.?
?Because of the very fast growth in our resource base and increase in our loan resources, we need to make sure we are continually above the capital adequacy ratio (CAR),? he said.
Last year, Valdepeñas said the bank?s deposit base rose by more than 60 percent, the fastest in the industry, despite the lingering global financial turmoil.
?That means we need to buy assets and some of these assets will have an impact [on our CAR],? he said.
In 2008, Union Bank recorded a net income of P2.07 billion, 30.55 percent lower than year-ago level, primarily on lower trading gains.
Interest income on loans and other receivables increased, however, by 32.71 percent to P5.39 billion over a year ago as the bank expanded its corporate, commercial and consumer finance business.
The bank?s total resources surpassed the P200 billion mark, ending 2008 at P203.90 billion, 4.4 percent higher than a year ago.
