Sterling Bank of Asia has raised P500 million from the sale of Tier 2 notes on improved investor appetite and growing liquidity in the local capital market.
Proceeds of the fund-raising activity would be used to support the bank’s expansion plans and to boost its lending business to take advantage of the higher demand from businesses and consumers, said Lamberto Villena, president and chief executive of Sterling Bank.
The tier 2 notes fetched a fixed interest rate of 6.125 percent and have a 10-year maturity. The yield is payable on a quarterly basis over the 10-year period, but the bank has the option to redeem them on the fifth year subject to approval by the Bangko Sentral ng Pilipinas.
The sale of the debt notes came amid significant liquidity in the domestic capital market and a more upbeat sentiment within the country.
Tier 2 notes are subordinated debt securities, holders of which are not the top priority in payment in case of business failure of the issuer. These are in contrast with unsubordinated debt instruments, holders of which are given priority in case of financial failure of the issuer.
Sterling Bank said its intention to expand operations came with its expectation of an increase in demand for loans.
The banking industry projects a rise in consumption among Filipino households and investments by enterprises on the back of a generally favorable outlook on the Philippine economy. A consensus among economists was that the economy would grow faster this year than last year’s 3.9 percent.
The government announced the other day that in the first quarter of 2012, the economy grew 6.4 percent, beating most expectations. The surprising rate of expansion was attributed to higher government spending, a recovery in exports and strong domestic consumption.
Banking industry players said households were seen inclined to purchase more big-ticket items such as residential properties and automobiles and were thus likely to increase demand for bank loans to support spending.
The appetite for consumer loans is also being boosted by remittances from Filipinos working abroad, economists said. The BSP expects remittances to grow at least 5 percent from last year’s $20.1 billion.
Enterprises are seen demanding more loans this year to support their expansion plans. Results of a survey released by the BSP last month showed that more firms have expansion plans to take advantage of rising domestic demand.