PNB to raise P3 billion via negotiable certificates of deposit

MANILA, Philippines—Philippine National Bank is raising at least P3 billion from an offering of negotiable certificates of long-term deposits with attractive interest rates to boost funds for banking operations.

In a disclosure to the Philippine Stock Exchange on Thursday, the Lucio Tan-led PNB said the offer period for the long-term negotiable certificate of deposits (LTNCDs) begins on Nov. 3 and would run until Nov. 15, with the issue date tentatively set for Nov. 18.

These instruments will have a maturity of five years and three months from issue date.  Interest will be paid quarterly and will be tax-exempt for individual investors if held for more than five years.  They are covered by Philippine Deposit Insurance Corp. subject to the P500,000 maximum insurance coverage per depositor.

PNB’s LTNCDs will be issued in minimum denominations of P500,000 and increments of P100,000 thereafter.

The bank has mandated Deutsche Bank AG as the sole arranger and selling agent for this exercise.  Other selling agents are Allied Bank, First Metro Investment Corp., Multinational Investment Bankcorporation, PNB and PNB Capital & Investment Corp.

LTNCD are time deposits but have longer maturities. While they cannot be pre-terminated, unlike regular time deposits, they are negotiable so they can be sold at market prices to other investors through the secondary market.

By using the LTNCD structure, which is tax-free because of the long tenor, banks can offer better yields to clients. This is because unlike regular time deposits, LTNCDs are slapped with a lower requirement.