Banks readying funds for big projects

The country’s largest banks have set up large debt offering programs to diversify funding sources amid rising demand for long-term loans for big-ticket projects such as infrastructure.

Metropolitan Bank & Trust Co. has created a P100-billion bond and commercial paper program to support lending and diversify funding sources, the bank told the Philippine Stock Exchange.

In a separate disclosure, Bank of the Philippine Islands approved the creation of a P50-billion bond and commercial paper program.

Earlier, the SM group’s BDO Unibank obtained approval from its board to set up a P100-billion bond program to ensure leeway for further expansion.

Banks’ debt issuances are exempted from the registration requirement of the Securities and Exchange Commission (SEC). This is because banks are presumed to be highly regulated by the Bangko Sentral ng Pilipinas and by nature, they already have access to public funds by accepting deposits.

The trading of bank securities, however, is subject to SEC listing and trading rules. If their securities are listed on fixed income platform Philippine Dealing & Exchange Corp., for instance, this will involve SEC-licensed fixed income market salesmen who deal with retail investors.

Metrobank said its P100-billion bond and commercial paper program would be done in one or more tranches and tenors of at least three months.

Asked about this new trend of banks preparing to issue local bonds and commercial paper, BDO Capital & Investment Corp. Eduardo Francisco said this would give the banks more access to long-term funding to allow them to fund more infrastructure for the private sector.

“Currently, we use deposits to fund long-term loans and assume deposits will just keep on rolling over,” Francisco said.

“More corporates (entities) are also asking for term loans. Previously, they were mainly using short-term working capital. Now, they are appropriately asking for term loans to match their fixed assets and capital investments,” he explained.