East West raises P5B from deposit issue

Gotianun-led East West Bank is raising as much as P5 billion from the issuance of long-term deposits, taking advantage of excess cash in the financial system to boost funds for relending.

In a disclosure to the Philippine Stock Exchange on Friday, East West Bank said it had obtained board approval to offer long-term negotiable certificates of deposit (LTNCDs).

East West Bank is looking at a tenor of five years and six months for this new tranche of LTNCDs, bank president Antonio Moncupa said.

“We are doing the offer for better liability management and likewise to match the funding of our long term assets. This would be perfect funding for our project finance and consumer loans, particularly mortgages, credit cards and personal loans,” he said in a text message.

Using the LTNCD structure, the bank is bracing for higher loan growth as it expanded its corporate and consumer lending units.

LTNCDs are time deposits but have longer maturity and carry higher yields.

While they cannot be preterminated 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.

Last year, East West Bank’s offering of LTNCDs with a tenor of five years and six months carried a coupon rate of 5 percent a year. Doris C. Dumlao