The indicative interest rate on Union Bank’s LNTCDs, which will have a tenor of five years and six months, is between 3.25 percent and 3.5 percent per annum, the bank said in a print ad published on Monday, the start of the offering period which will run until October 11.
The interest rates will be finalized before the end of the offer period, which Union Bank has the right to adjust “as needed,” the bank said. Interest payments will be made on a quarterly basis.
The LNTCDs are being offered in minimum denomination of P250,000 and in increments of P50,000 thereafter.
Union Bank has mandated British banking giant HSBC to be the sole arranger and bookrunner for this issuance. The selling agents are HSBC, Multinational Investment Bancorporation and Union Bank itself.
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 insurance under Philippine Deposit Insurance Corp. up to the maximum coverage of P500,000 per depositor.
Union Bank president Victor Valdepenas first announced plans to raise fresh funds through an offering of LNTCDs last May during the bank’s annual stockholders meeting, noting that it’s “very attractive to lock up long-term deposits at current interest rates.”