Banks raise funds to meet growth in loan demand

Whether in the form of IOUs or equity, more banks are bracing themselves for more opportunities to help fuel economic expansion by raising fresh funds to expand their balance sheets.

Rizal Commercial Banking Corp. yesterday announced a plan to raise as much as P15 billion from the sale of new shares to existing shareholders.

Separately, Aboitiz-led Union Bank of the Philippines disclosed a plan to issue up to P20 billion worth of long-term negotiable certificates of time deposits (LTNCDs) in tenors of 5.5 to 10 years in multiple tranches over a period of one year.

“Fund-raising activities of banks are all related to the massive growth in loans. Many were surprised that the fourth quarter turnout was very good in terms of asset growth. If they continue at this pace through 2018, they will surely need to build capital, especially when President Duterte’s “Build, Build, Build” program comes, that will translate to a significant amount of growth,” HSBC Philippines chief executive officer Wick Veloso said.

Earlier, local banking giants Metropolitan Bank and Trust Co. and Bank of the Philippine Islands announced plans to launch a stock rights offerings amounting to P60 billion and P50 billion, respectively.

In a disclosure, RCBC said while its current capital ratios were above the requirements of the Bangko Sentral ng Pilipinas, it expected the proceeds of the rights offer to boost its capital ratios to levels in line with Basel 3 standards and to support asset growth.

The Basel 3 capital adequacy framework introduced a complex package of reforms designed to improve the ability of bank capital to absorb losses, extend the coverage of financial risks and put in place stronger firewalls against periods of stress.

“The bank believes it is well positioned to capitalize on economic growth in the Philippines, which the bank expects to be conducive to further loan expansion across industry segments and consumer spending,” RCBC said.

RCBC also intends to use investments in technology to improve customer experience, broaden its customer base and increase operational efficiency.

Union Bank, for its part, will offer an initial P3 billion worth of LTNCDs, with an oversubscription option.