To diversify funding sources, AUB seen tapping bond market

The Rebisco group’s banking arm Asia United Bank (AUB) plans to debut on the local bond market and set up a bond program of as much as P30 billion, diversifying its funding source outside of deposit-taking.

AUB’s board of directors approved the setting up of the bond program, the bank disclosed to the Philippine Stock Exchange on Tuesday. The terms, details and timing will be set by the management.

The bond offering of banks is exempted from the registration requirement of the Securities and Exchange Commission. Part of the new requirement is for the bonds to be enrolled or traded in a formal market.

More and more banks are tapping the bond market as the Bangko Sentral ng Pilipinas has made it easier for banks to issue bonds.

Previously, the BSP required banks that were planning to offer bonds to back up 100 percent of these bonds with government securities as collateral. If the bank wouldn’t use government securities as collateral, the value of the collateral must exceed that of the issue size. That prevented the issuance of bonds by banks as they would only lose money if they borrow from the public just for lending to the government at a lower rate.

A new circular issued by the BSP last year scrapped the old collateral requirement, thereby encouraging a number of banks to tap the local bond market.

Meanwhile, Aboitiz-led Union Bank of the Philippines said in a separate disclosure that it would seek authority from the BSP to issue up to P20 billion worth of debt notes qualifying as tier 2 or supplementary capital.

The bank also plans to redeem ahead of maturity P7.2 billion worth of outstanding tier 2 notes due 2025, subject to prior BSP approval.