BDO expected to raise $200M in core capital

The country’s largest bank, Banco de Oro Unibank, is expected to tap the capital market to raise at least $200 million in tier 1 or core capital this year to strengthen competitive footing and prepare for stringent global capital adequacy requirements under Basel 3.

BDO president Nestor Tan told the Inquirer in an interview that the bank was planning to raise tier 1 capital but still waiting for the “appropriate” time to do so. As everything was in the planning stage, he could not give an estimate on how much additional capital would be raised.

Tan said the amount would depend on two crucial factors: the changes in the regulatory requirement under Basel 3 and the expectation of loan growth that BDO will match with an increase in funding.

He said BDO was waiting for the guidelines to be issued by the Bangko Sentral ng Pilipinas on Basel 3. Banking regulators have given banks two years to do their strategic planning for Basel 3.

Universal and commercial banks are required to adopt by Jan. 1, 2014, the capital adequacy standards under Basel 3, which introduces a complex package of reforms designed to improve the ability of banks to absorb losses, extend the coverage of financial risks and have stronger firewalls against periods of stress.

A bank analyst said that based on market consensus, at least $200 million in additional core capital would likely be raised to give BDO enough room to expand its loan portfolio and put the bank at the same level with peers Bank of the Philippine Islands and Metropolitan Bank and Trust Co. in terms of tier 1 capital.

As of end-2011, BDO’s capital adequacy to risk assets ratio improved to 15.8 percent from 13.8 percent in 2010. This was higher than the minimum CAR of 10 percent required by the BSP.

BDO, owned by the country’s wealthiest man, Henry Sy, is the country’s largest bank with total assets exceeding P1 trillion. The bank has historically outpaced its peers in terms of asset growth.—Doris C. Dumlao