Sterling eyes another P500-M notes issue

MANILA, Philippines - Sterling Bank of Asia is eyeing another P500-million note issue for its Tier 1 capital requirements, the bank’s top executive said.

Sterling Bank president and chief executive Lamberto R. Villena said they plan to issue the notes in the second semester.

Last week, Sterling Bank raised P500 million from 10-year Tier 2 notes with a fixed interest rate of 6.125 percent payable quarterly, with an option to redeem on the fifth year.

Villena said Tier 1 capital was the preference as it offers the bank more flexibility.

“First, it is capital that can be utilized in addressing the Basel II or Basel III risk-weighted capital framework,” the bank official said.

The capital adequacy ratio (CAR) under Basel III will increase 2.5 percentage points from 10 percent currently required by the Bangko Sentral ng Pilipinas (BSP).

Fresh capital also allows the bank to retire high-cost funds ahead of maturities, hence resulting in greater savings or earnings for the bank. It also allows the bank to open new loans without reducing its CAR.

Villena said the bank is also on the lookout for highly-rated corporate bonds and other fixed-income instruments as investment options.

“The bank is avoiding the equity market which is too volatile for a conservative institution like Sterling,” he added.

Sterling Bank has a strong capital base of over P1.5 billion. It has been opening six new branches a year, or a new branch every two months.