Security Bank plans P10B deposit certificates

MANILA, Philippines—Security Bank Corp. plans to raise fresh funds by issuing as much as P10 billion worth of long-term negotiable certificates of deposits (LTNCDs) offering higher yields to investors.

The bank disclosed to the Philippine Stock Exchange on Wednesday that it had obtained authority to issue five- to seven-year LTNCDs.

The timing of the issuance would depend on how soon the bank would be able to secure the Bangko Sentral ng Pilipinas’ approval but the bank is targeting to hold the offering by mid-November, Security Bank treasurer Rafael Algarra Jr. said in an interview.

It will be Security Bank’s very first time to issue LTNCDs, which are time deposits with longer maturity and which carry higher yields. While they cannot be pre-terminated, unlike regular time deposits, they are negotiable so they can be sold at market prices to other investors through the secondary market.

By using the LTNCD structure, which is tax-free because of the long tenor, banks can offer better yields to clients. This is because unlike regular time deposits, LTNCDs are subject to easier terms.

The issuance of LTNCDs, Algarra said, was aimed at further building up the bank’s deposit base and strengthening its balance sheet by having longer-term liabilities in its books.

Alcantara said Security Bank was now looking at several banks that had expressed interest in arranging the offering.