BDO issue of LTNCDs oversubscribed, raising P11.8-B

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BDO Unibank, Inc. (BDO) said it raised P11.8 billion from its long-term negotiable certificates of deposit (LTNCD), more than twice the original offer size amid robust demand for the debt paper.

In a disclosure to the bourse on Friday, the country’s largest bank in terms of assets announced it sold P11.8 billion worth of paper, well over the P5 billion initially planned. It calld the fund-raising exercise “the largest single issuance to date of LTNCDs by a local bank.”

Proceeds will be used to “diversify the maturity of its funding sources and support business expansion plans.”

Due to strong market appetite from its exercise, the bank was prompted to end the offer on Aug 10, a day ahead of schedule.

LTNCDs, like regular time deposits, offer higher interest rates but unlike time deposits, cannot be pre-terminated. Being “negotiable” means that these can be sold on the secondary market.

“Other features of the LTNCD include: a) tax exemption on interest income for individual investors if held for at least five (5) years; b) quarterly interest payments; c) deposit insurance coverage with the PDIC up to a maximum of P500,000 per depositor; d) negotiability subject to market conditions. The LTNCD issuance is part of the Bank’s efforts to diversify the maturity profile of its funding sources and support business expansion plans,” BDO said.

The instrument has a term of 5.5 years, maturing on Feb. 18, 2023, with an interest rate of 3.625% per annum. The issue date is Aug 18.

BDO tapped Deutsche Bank AG, Manila Branch and ING Bank N.V., Manila Branch as the Joint Lead Arrangers and Selling Agents for the offer with BDO and BDO Private Bank serving as selling agents.

BDO’s last LTNCD issuance was on April 2015, when it was able to raise P7.5 billion, higher than its initial offer size of P5 billion. The paper matures on Oct. 6, 2020 with a final interest rate of 3.75% per annum.

BDO’s net profit was little changed in the first six months of the year at P13.3 billion.

When one-offs are factored out, core earnings would have posted double-digit growth in the January to June period.

Consumer loans grew 17% year-on-year to P1.6 trillion in the first half.

Total deposits hit P2 trillion during the period, against P1.8 trillion a year earlier, driven by a 17% rise in its low-cost CASA deposits, which account for 73% of the bank’s total deposits.

Net interest income rose 22% to P38.6 billion in the first half. – Janine Marie D. Soliman