UBP issues P5B in deposit certificates

Aboitiz-led Union Bank of the Philippines on Monday debuted on the long-term negotiable certificate of deposits (LTNCD) market with an offering of as much as P5 billion, taking advantage of the liquid financial market to secure long-term funding.

The indicative interest rate on Union Bank’s LTNCDs, which will have a tenor of five years and six months, is between 3.25 percent and 3.5 percent per year, the bank said in a print ad published Monday, the start of the offer period which will run up to Oct. 11.

The interest rates will be finalized before the end of the offer period, which Union Bank has the right to adjust as needed, the bank said.  Interest payments will be made on a quarterly basis.

The LTNCDs are being offered in minimum denomination of P250,000 and in increments of P50,000 thereafter.

Union Bank has mandated British banking giant HSBC to be the sole arranger and bookrunner for this issuance.  The selling agents are HSBC, Multinational Investment Bancorporation and Union Bank itself.

While the LTNCDs cannot be pre-terminated unlike regular time deposits, they are negotiable so they can be sold in the secondary market to other investors. By using the LTNCD structure, which is tax-free because of the long tenor, banks can offer better yields to clients. LTNCDs are covered by insurance under Philippine Deposit Insurance Corp. up to P500,000 per depositor.

Union Bank president Victor Valdepenas first announced plans to raise fresh funds through an offering of LTNCDs last May during the bank’s annual stockholders meeting. He said then that it was “very attractive to lock up long-term deposits at current interest rates.” This fund-raising is seen boosting the bank’s efforts to grow its loan book.

The Aboitiz-led bank posted a 52-percent year-on-year profit growth in the first semester to P6.2 billion on robust trading gains and strong net interest and fee-based earnings. Loan book expanded by 14 percent year-on-year to P99.74 billion while total deposits rose by 54 percent to P259.55 billion. Doris C. Dumlao