UCPB seeks to raise P20B

Universal bank UCPB plans to raise P20 billion in fresh capital from the sale of shares to existing shareholders, seeking to take advantage of lending opportunities and comply with capitalization requirements.

UCPB president and chief executive officer Jeronimo Kilayko Tuesday said the bank was hoping to launch a stock rights offering to raise fresh funds before the end of the year.

“We need to have more capital. We have a lot of new products and we need more branches,” Kilayko told the Inquirer.

Kilakyo said UCPB should double its branch network as this distribution channel was crucial in boosting the bank’s consumer lending portfolio.

UCPB now has 233 branches, of which 188 are branches of parent bank and 45 are branches of UCPB Savings Bank.

The bank has an authorized capital of P3.75 billion. It earlier obtained approval from shareholders to raise its capital to as much as P40 billion.  Stockholders equity is about  P18 billion, including P12 billion in capital notes issued to Philippine Deposit Insurance Corp. and some retained earnings.

Once UCPB is able to raise P20 billion from the stock rights offering, the bank plans to redeem the P12 billion capital notes from PDIC.  UCPB will end up with P26 billion in capital after the stock rights offering and the redemption of capital notes.

The recapitalization program, however, still needs the imprimatur from the Duterte administration through various agencies such as Department of Finance, PDIC, Governance Commission for GOCCs (government-owned and -controlled corporations), Presidential Commission on Good Government and the Office of the President.

In 2012, the Supreme Court ruled with finality that the government owned the shares claimed by businessman Eduardo “Danding” Cojuangco Jr. in UCPB and that these should be used for the benefit of coconut farmers.  The SC ruling covered 75 percent of UCPB identified to have been funded by the coco levy.

Meanwhile, only 25 percent of UCPB’s outstanding shares remain sequestered by the government and still under liquidation.  Only 1.5 percent of these shares are undisputed.

In case the state cannot subscribe to the bank’s right offering, the government can assign its rights to another party, said UCPB senior vice president and corporate secretary Ildefonso Jim Jimenez.

As far as the bank is concerned, the fresh capital is needed to be able to take advantage of many opportunities in the banking arena.  With the domestic economy growing by about 7 percent, UCPB executive vice president Cesar Rubio said the bank was missing out on a lot of opportunities without enough capital.  “With a CAR (capital adequacy ratio) of 10 percent, we can’t expand too much,” Rubio said.

With higher-margin consumer loans growing by about 30 percent, the capital increase is seen imperative to ensure the bank’s longer term competitiveness, viability and growth.

At the same time, the Bangko Sentral ng Pilipinas requires all universal banks to put in place at least P20 billion in capital by next year.

Once the recapitalization program is implemented, UCPB expects to beef up its CAR to 15 percent and eventually settle at 12 percent of risk assets.

In the first semester, UCPB grew its net profit by 42 percent year-on-year to P1.8 billion on the back of higher demand for consumer loans and trading gains.  Its loan portfolio rose by 21 percent year-on-year to P138.6 billion.