More Philippine banks are raising fresh capital to boost their capability to oil the wheels of the growing domestic economy.
Sy family-led China Bank has obtained board approval to raise as much as P15 billion from the sale of peso-denominated debt notes qualifying as tier 2 or supplementary capital.
Separately, Philippine Savings Bank has obtained the green light from the Bangko Sentral ng Pilipinas to amend its articles of incorporation to expand its authorized capital stock to P6 billion divided into 600 million common shares from P4.25 billion divided into 425 million common shares.
The shares have a par value of P10 per share but based on today’s market price, an additional 175 million common shares are worth over P10 billion.
“The increase in authorized capital stock will provide the bank more flexibility for any potential business opportunities in the future that would need sufficient authorized and unissued shares that can be issued promptly,” PSBank said in a disclosure to the Philippine Stock Exchange.
In order to satisfy the subscription requirement, PSBank’s board has also approved the declaration of stock dividends in the amount of P437 million equivalent to 43.75 million common shares in favor of all stockholders of record in proportion to their respective shareholdings. These will be payable on a record date to be set after approval by the Securities and Exchange Commission of the increase in authorized capital stock.
For China Bank, proceeds from its tier 2 issuance will be used to “support the bank’s strategic initiatives and expansion programs,” the bank said in a separate disclosure.
For these debt notes to be eligible as tier 2 capital, they must be issued and paid in, subordinated to depositors and general creditors of the bank/quasi-bank and neither secured nor covered by a guarantee of the issuer or related entity or other arrangement that legally or economically enhances the seniority of the claim vis-à vis depositors and general bank/quasi-bank creditors.
With regard to maturity, tier 2 notes must have an minimum original maturity of five years. There should be no step-up interest rates or other incentives to redeem them. To exercise a call option after a minimum of five years, the issuer must receive prior supervisory approval.
In the last three years, the country’s biggest banks have raised fresh capital form the sale of new shares to their existing shareholders. BDO Unibank raised P60 billion in fresh equity in 2017 while Metrobank also raised P60 billion from a stock rights offering in 2018. Last year, BPI raised P50 billion from a stock rights offering.