China Bank raises P10.25 bil­lion from LTNCD of­fer

Business World - - BANKING & FINANCE - By Karl An­gelo N. Vi­dal Re­porter

CHINA BANK­ING Corp. (China Bank) raised P10.25 bil­lion from its long-term ne­go­tiable cer­tifi­cates of de­posit (LTNCD), which it wants to use to sta­bi­lize its cost of fund­ing and ex­pand its busi­ness.

At the cer­e­mo­nial list­ing of the in­vest­ment in­stru­ments on Thurs­day at the Philip­pine Deal­ing Sys­tem (PDS) in Makati City, the Sy- led lender said it raised P10.25 bil­lion from the pe­so­de­nom­i­nated is­sue.

The notes will ma­ture in 5.5 years and carry an in­ter­est rate of 4.55% to be paid quar­terly un­til Jan. 12, 2024.

The LTNCD is­suance, the largest in the bank­ing in­dus­try in 2018, was twice over­sub­scribed, prompt­ing China Bank to up­size the of­fer to P10.25 bil­lion from its ini­tial of­fer of P5 bil­lion.

The is­suance is the first tranche of China Bank’s P20­bil­lion LTNCD pro­gram ap­proved by the cen­tral bank.

Like reg­u­lar time de­posits of­fered by banks, LTNCDs of­fer higher in­ter­est rates. How­ever, LTNCDs can­not be pre- ter­mi­nated but can be sold on the sec­ondary mar­ket, mak­ing them “ne­go­tiable.”

In his speech, China Bank Chief Op­er­at­ing Of­fi­cer Romeo D. Uyan, Jr. said the “strate­gic and well-timed” LTNCD of­fer­ing will en­able the lender “to sup­port its busi­ness ex­pan­sion plans as well as to im­prove the bank’s de­posit ma­tu­rity profile.”

“What is more re­mark­able is that we are able to achieve this in an en­vi­ron­ment on both do­mes­tic [ for­eign ex­change] and in­ter­est rates have been very volatile brought about by overseas events,” Mr. Uyan added.

Bene­dict L. Chan, China Bank trea­surer, said the P10.25 bil­lion raised through LTNCDs will sta­bi­lize the lender’s long-term in­ter­est rate costs.

“With the cur­rent en­vi­ron­ment where the rates are still con­tin­u­ing to go up, we ex­pect these funds to be able to tidy us for one to two months at most,” Mr. Chan told re­porters on Thurs­day.

The Hongkong and Shang­hai Bank­ing Corp. Ltd. was the sole ar­ranger and bookrun­ner of the of­fer. It also served as a sell­ing agent to­gether with China Bank and China Bank Cap­i­tal Corp.

Mr. Chan said the bank might of­fer the next tranche of its note pro­gram “in De­cem­ber if we need to. If not, in 2019,” adding the next of­fer will be sub­ject to mar­ket con­di­tions and the risk ap­petite of the in­vestors.

The P20-bil­lion LTNCD pro­gram is part of China Bank’s fund­ing ini­tia­tive amount­ing to P50 bil­lion. The other P30 bil­lion will be raised through com­mer­cial papers and cor­po­rate bonds.

“We ex­pect to raise more funds in or­der for us to be able to con­tinue the as­set buildup that China Bank has done,” Mr. Chan added.

China Bank’s list­ing brings the to­tal vol­ume of out­stand­ing listed se­cu­ri­ties to P891.2283 bil­lion, floated by 47 com­pa­nies.

In June 2017, China Bank listed P6.34 bil­lion in LTNCDs due 2022. Prior to this, the lender also raised P9.59 bil­lion in the first tranche in Novem­ber 2016.

Apart from China Bank, UnionBank of the Philip­pines, Inc., BDO Uni­bank, Inc., Se­cu­rity Bank Corp. and East West Bank­ing Corp. have also com­pleted LTNCD of­fer­ings this year, rais­ing P3 bil­lion, P8.2 bil­lion, P5.78 bil­lion and P2.45 bil­lion, re­spec­tively.


Mean­while, China Bank ex­pects its loan book to grow by 15-18% this year, Mr. Chan said.

“So far, the take up in the first half is small given the fact that we are in a ris­ing in­ter­est rate en­vi­ron­ment,” he said, adding it may start to pick start­ing in the sec­ond half of the year.

“Cor­po­rates are now in the po­si­tion that they know that the in­ter­est rates are go­ing up and they need to do some­thing in or­der to lock up the long term rates as well.”

China Bank’s port­fo­lio con­sists of 85% in loans and 15% in se­cu­ri­ties. Bro­ken down, its loan book is “60-70% cor­po­rate and 30-40% re­tail.”

The bank booked a net in­come of P1.5 bil­lion in the first quar­ter of the year, 2% higher than the same pe­riod last year amid growth in its loan busi­ness.

China Bank shares went up 10 cen­tavos or 0.30% to close at P33.20 apiece on Thurs­day.

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