Philippine Business Bank, the banking arm of the group of businessman Alfredo Yao, plans to raise P5 billion through an offering of high-yielding deposit certificates.
In a disclosure to the Philippine Stock Exchange, PBB said its board had approved a resolution providing for the issuance of long-term negotiable certificates of deposits (LTNCDs) in two or more tranches over a period of one year.
The issuance is seen supporting the bank’s expansion program and enhancing its profitability.
PBB president Roland Avante said that for the first tranche, the bank would likely issue P1 billion to P1.5 billion in deposit certificates as soon as the Bangko Sentral ng Pilipinas’ approval was obtained.
“This will be a program issue, not to be issued all in one time. Each time we will issue, we will inform the BSP,” he said.
The LTNCD will likely have a tenor of 5.5 years, Avante said.
LTNCDs are negotiable certificates of deposit with a designated maturity. They represent a bank’s obligation to pay the face value upon maturity, with periodic coupon or interest payments during the life of the deposit. They are covered by deposit insurance provided by Philippine Deposit Insurance Corp. up to a maximum of P500,000 per depositor.
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.
Avante said proceeds would be used to support PBB’s growing mortgage business.
“The real estate projects that we supported before now need end-user financing and as the books expand, the funding requirement grows,” Avante said.
Avante said PBB was expecting more mortgage financing requirements in the next three to six months.
He said it was a good time for PBB to address interest rate risks by locking in long-term financing to match or narrow the gap with the tenor of housing loans.