Local banking giant Metropolitan Bank and Trust Co. has raised a landmark P16 billion from an offering of peso-denominated debt notes qualifying as tier 2, or supplementary, capital under the stringent Basel 3 capital adequacy framework.
This marked the single largest tranche of Basel 3-compliant tier 2 debt notes issued by a local bank to date.
The first Basel 3 compliant instrument with a loss absorption feature offered in the domestic market was the P10-billion issuance of state-owned Development Bank of the Philippines (DBP) late last year. Unlike previous tier 2 notes issued by banks, the issuance of Metrobank and DBP are recognized as bank capital in accordance with Basel 3 standards.
In a statement, Metrobank said the transaction was 2.7 times oversubscribed with strong demand from both institutional and retail investors.
The tier 2 notes were priced at a coupon rate of 5.375 percent per annum, or 151 basis points over the five-year PDST-F government benchmark. They will mature in June 2024, but Metrobank has the option to redeem or call on the notes early in June 2019.
The size of the order book prompted Metrobank to close the offer period three days earlier and double the issue size to accommodate customer demand.
“We are very pleased with the overwhelming demand for our notes and the strong display of investor confidence in Metrobank. We would like to thank the investing community for their support. Proceeds from this transaction will help us capitalize on growth opportunities amid strong economic prospects,” Metrobank president Fabian Dee said.
The settlement date on the tier 2 notes is set on March 27, 2014. ING Bank N.V.- Manila branch and Standard Chartered Bank acted as joint lead arrangers and selling agents, while Multinational Investment Bancorporation was the market maker and selling agent for the transaction. First Metro Investment Corp. and Metrobank acted as limited selling agents.
Universal and commercial banks were required by the BSP to adopt starting Jan. 1, 2014 the capital adequacy standards of Basel 3—a complex package of reforms designed to improve the ability of banks to absorb losses.
In 2013, Metrobank’s loan portfolio grew by 16.2 percent to P611 billion. It was supported by a 37.6-percent hike in deposits to P1 trillion. The bank ended the year with consolidated resources of P1.4 trillion.