First Metro to offer P7 B in retail bonds

MANILA, Philippines—First Metro Investment Corp., the investment banking unit of the Metrobank group, plans to debut in the local bond market in October with an offering of as much as P7 billion worth of retail bonds.

FMIC has obtained approval from its board to float these bonds, the company told the Philippine Stock Exchange on Friday.

“This is the first time we’ll access the general capital markets,” FMIC president Roberto Juanchito Dispo said in an interview.

The offering is planned by October after the Bureau of Treasury’s issuance of a new tranche of retail Treasury bonds, Dispo said, adding that the planned tenor is five years.

“Intrinsically, liquidity is trapped in the local capital market… so this is a great opportunity for us to provide alternative investment outlets. This is also a liability management exercise to lengthen our deposit base tenor so we’re hitting two objectives,” Dispo said.

FMIC had issued a request for proposals from foreign banks that are potential underwriters.  Dispo said the company would announce the mandate by next week.

The issue size is a minimum of P5 billion which can be increased to P7 billion in case of strong demand.

“We’d like to believe that our franchise, people’s familiarity with the branding, will allow us to sell our first-ever bonds,” Dispo said.

“Another strategic value to us is the FMIC bond will carry a lower reserve requirement unlike deposits or deposit substitutes which are subject to 21 percent reserves,” Dispo said.

Citing Bangko Sentral ng Pilipinas regulations, Dispo said financial institutions with quasi-banking licenses are required to set aside only 5 percent of bond proceeds as reserves consistent with the policy thrust to encourage these institutions to lengthen deposit base and diversify funding source.

FMIC has also recently obtained a license from the BSP to offer trust and other fiduciary services. This allows the investment house to create a unit that will act as trustee or administer any trust or hold property in trust or on deposit for the use and benefit of others, and/or act as financial consultant, investment adviser or portfolio manager.  As a trustee, it is mandated to administer the funds or property under its custody with the diligence that a prudent man would exercise in the conduct of an enterprise.

The trust operations are seen complementing FMIC’s investment banking and investment advisory activities.

With a trust license, for instance, potential clients can outsource the fund management to FMIC. Among the potential clients that FMIC would like to have an outsourcing deal in fund management are the state-controlled pension funds Government Service Insurance System and Social Security System as well as the Philippine Health Insurance Corp., an agency of the Department of Health.