BDO plans to issue P15B in debt notes

MANILA, Philippines—Leading lender Banco de Oro Unibank plans to issue P15 billion worth of debt notes qualifying as tier 2 or supplementary capital over a period of one year in line with its expansion plan.

In a disclosure to the Philippine Stock Exchange on Monday, BDO said the proposed notes offering had been approved by the Bangko Sentral ng Pilipinas.

“The tier 2 program will support our business expansion,” BDO president Nestor Tan said in a mobile text message.

When asked why BDO was issuing tier 2 rather than core capital this time, Tan explained: “It has always been our strategy to have a mix of debt and equity in our capital structure. Given our situation, debt capital is more cost-efficient than equity.”

In the first quarter, BDO’s capital adequacy ratio (CAR) stood at 14 percent while the annualized return on average common equity was 11.4 percent. The CAR level is higher than the 10-percent minimum ratio required by the Bangko Sentral ng Pilipinas.

According to credit watcher Fitch Ratings, BDO had boosted its credit profile with the P11-billion common equity issue last year, which restored its core tier 1 CAR back to 10 percent at end-2010 from 8.3 percent at end-2009. Disclosures on the proposed tier 2 issuance will be made when the final terms and issue dates are set, the bank said in the disclosure.

BDO, the country’s largest bank in terms of assets (now worth more than P1 trillion), has been growing rapidly since the turn of the century.

In recent months, BDO has two more banks in the pipeline for acquisitions: Export and Industry Bank and Asiatrust Development Bank.

The banking arm of retail tycoon Henry Sy posted an unaudited net profit of P2.44 billion in the first quarter, up by 18 percent from a year ago. This was attributed to a diversified revenue stream and tempered growth in operating expenses and conservative provisioning. Net interest income expanded alongside trading and foreign exchange gains as well as other non-interest income.