The new offering of long-term negotiable certificates of deposits (LTNCDs) will carry a maturity of five and a half years and likely priced at about 4 percent per annum, BDO told the Philippine Stock Exchange on Monday.
Banks currently pay about 2-3 percent per annum on regular time deposits.
The pricing will be finalized at the end of the offer period which began on Monday and will run until March 15. BDO, however, reserves the right to adjust the timing of the offer as needed. Issue date is targeted by March 25.
While the LTNCDs cannot be pre-terminated unlike regular time deposits, they are negotiable so they can be sold in the secondary market to other investors. By using the LTNCD structure, which is tax-free because of the long tenor, banks can offer better yields to clients.
LTNCDs are covered by deposit insurance with the Philippine Deposit Insurance Corp. up to a maximum amount of P500,000 per depositor.
For this LTNCD offering, interest will be paid quarterly and will be tax exempt for individual investors if held for more than five years. The minimum investment is P100,000 with increments of P50,000 thereafter.
BDO, the banking arm of mall tycoon Henry Sy, has mandated foreign banks Standard Chartered Bank and ING Bank N.V. as the joint lead arrangers and selling Agents for the LTNCD, while BDO and BDO Private Bank are the other selling agents.