UnionBank to raise more funds thru LTNCDs

UNION Bank of the Philippines plans to issue more long- term negotiable certificates of time deposit ( LTNCDs) to build up its liquidity coverage ratio ( LCR) amid tighter regulatory requirements.

“We probably will be issuing more LTNCDs,” UnionBank President and Chief Executive Officer Edwin Bautista told reporters in an interview on Wednesday night.

“We will be more aggressive with loans. We need to increase our deposit base again and there are rules on this LCR [ whereby] we need to match the tenor of the long- term loans with deposits,” Bautista explained when asked for the reason behind the bank’s aggressive capitalraising exercise.

The Bangko Sentral requires banks to hold sufficient high quality liquid assets that can be easily converted into cash to service their liquidity requirements.

In February, UnionBank successfully raised P3 billion from the first tranche of its P20 billion LTNCD issuance approved by the Bangko Sentral ng Pilipinas ( BSP).

In the first half of 2018, UnionBank reported total assets of P623.2 billion, up 12.8 percent from P552.6 billion a year ago. Net income in the period rose to P4.7 billion from P4.4 billion in the same period last year.

Banks sell instruments like LTNCDs to raise capital without having to sell shares. The bank is obliged to redeem the face value of the certificate upon maturity and pay out periodic coupons or interest payments during the life of the deposit.

The notes are similar to time deposits but have longer maturities and higher yields. They are negotiable and are insured with the Philippine Deposit Insurance Corp. up to P500,000 per depositor.

LTNCDs are also taxexempt on the interest income for qualified individuals or institutions if held for at least five years.

MAYVELIN U. CARABALLO