RCBC, PNB go offshore to fatten loan books

With the domestic capital market getting more confined, some of the country’s big banks are opting to tap the foreign debt market in order to fund their fast-growing loan portfolios.

Yuchengco-led Rizal Commercial Banking Corp. (RCBC) is raising $150 million from the reopening of its offshore debt due in 2023. This will be under its medium-term notes (MTN) program, giving a yield of 4.4084 percent per annum.

Philippine National Bank is also raising $350 million at a coupon rate of 4.25 percent per annum for a tenor of five years plus one day. This is the debut offer under the bank’s $1-billion MTN program.

Jose Mari Lacson, research head at ATR Asset Management, said the domestic capital market could be tightening with two big stock rights offering by banks underway.

“That will zap out some of the liquidity for equity capital that other banks may have preferred to boost their balance sheets. The timing can also be critical to securing lower cost capital ahead of interest rate hike expectations and weakening equities market,” Lacson said of the decision of RCBC and PNB to go abroad.

Metropolitan Bank & Trust Co. recently completed a P60-billion share-sale to existing shareholders while Ayala-led Bank of the Philippine Islands’ own P50-billion stock rights offering is ongoing.

For RCBC, the bank does not see foreign exchange risks rising with the issuance of offshore debt as this can be matched by its foreign currency deposit unit (FCDU) book.

The issuance will bring to $450 million its drawdown from its $2-billion MTN program. The reopening price is 98.762. Joint bookrunners are Deutsche Bank and UBS.

MTN is a type of medium-term, flexible debt program that allows issuers like PNB and RCBC to tailor their debt issuance to meet financing needs.

PNB’s issuance follows a roadshow in Singapore and Hong Kong last week. The notes, in denominations of $200,000 and increments of $1,000 thereafter, will settle on April 26, 2018 and mature on April 27, 2023.

Demand for the offering was around $1.2 billion at its peak, or four times oversubscribed, with 118 investors participating in the book-building. In terms of investor breakdown by geography, 86 percent was allocated to investors in Asia, and 14 percent to Europe, Middle East and Africa. In terms of investor breakdown by type, the biggest block of 74 percent was allocated to asset/fund managers, 12 percent to insurance companies, while the remaining went to banks.

Citigroup, MUFG, Standard Chartered Bank and Wells Fargo Securities were the joint arrangers of PNB’s MTN program, and the joint lead managers and joint bookrunners for the transaction.

RCBC and PNB’s notes will be listed on the Singapore Exchange Securities Trading Ltd.