RCBC raises P3.85B via deposit notes issuance

Yuchengco-led Rizal Commercial Banking Corp. has raised P3.85 billion in fresh funds for expansion through the issuance of high-yielding peso-denominated long-term deposit notes.

RCBC told the Philippine Stock Exchange on Thursday that it had issued long-term negotiable certificates of deposits (LTNCDs), consisting of P2.03 billion worth of fixed rate notes and P1.82 billion worth of zero-coupon notes.

The LTNCDs are maturing in five years and six months or by June 29, 2017.

The fixed rate LTNCDs carry a coupon of 5.25 percent a year while the zero coupon LTNCDs  were priced at a yield of 5.5 percent.

“The net proceeds of the transaction will be used by the bank to expand its long-term deposit base and support long-term asset growth and for other general funding purposes,” the bank said.

The Manila branches of Deutsche Bank AG and ING Bank N.V. acted as the joint lead arrangers and selling agents for the transaction while Multinational Investment Bancorporation was also appointed as selling agent and market maker.

This is also part of RCBC’s liquidity management efforts to match term assets with term liabilities.  The bank saw an opportune time to access long-term funding given the prevailing low-interest rate environment and ample liquidity in the financial system.

The instruments were offered for a minimum denomination of P50,000.

LTNCDs are slapped by the Bangko Sentral ng Pilipinas with a lower reserve requirement of 3 percent compared with the usual 21-percent requirement against the usual deposit liabilities of banks, giving banks a lot of incentive to offer such long-term savings products.

On the other hand, holders enjoy tax exemption if the instruments were held to maturity. Unlike the regular time deposits, investors are required to hold the LTNCDs until maturity. But since these instruments are negotiable, they can be used as collateral or sold to another investor without effecting a change in ownership.

RCBC offered similar instruments in April 2010, which raised for the bank P5 billion.