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The country’s biggest lender BDO Unibank is raising P60 billion in fresh capital to support further growth aspirations in the following years and brace for higher capital requirements to be imposed on the country’s biggest banking players.
BDO’s board has approved the increase in additional capital through the sale of new shares to existing investors, the bank disclosed to the Philippine Stock Exchange Monday.
“The fresh capital will support the bank’s medium-term growth objectives amid the country’s favorable macroeconomic prospects, and provide a comfortable buffer over higher capital requirements with the forthcoming imposition of the domestic systemically important bank (DSIB) surcharge,” the bank said
The Bangko Sentral ng Pilipinas (BSP) has classified banks depending on the extent of their systemic importance using pre-defined indicators for size, interconnectedness, substitutability and market reliance as a financial market infrastructure as well as complexity.
BSP Governor Amando Tetangco Jr. had said that the higher bar for DSIBs in terms of capital requirement and supervisory expectations would “strengthen the system by lowering the probability of systemic bank failures.”
As of end-June, BDO said its consolidated CET1 ratio and capital adequacy ratio (CAR) of 11.3 percent and 13.1 percent, respectively, were above the current regulatory minimum levels, even with the gradual implementation of the DSIB surcharge.
COL Financial head of research April Lee-Tan estimated that the bank’s P60-billion stock rights offering could add four percentage points in CET1 capital, “allowing BDO to meet stricter BSP capital requirements.”
The bank said the additional capital would allow it to sustain its momentum and take advantage of the country’s growth opportunities. Over the past five years, BDO’s customer loan portfolio grew at a 19 percent compounded annual growth rate, outpacing the industry’s 17 percent.
Details on the proposed pricing, rights ratio and timetable will be disclosed once these have been finalized, the bank said.
BDO is the biggest bank in terms of total assets, loans, deposits, capital and trust funds under management.