Banks tap debt market to raise P340 billion in 2018

MANILA, Philippines — Philippine banks raised P340 billion via the issuance of debt securities in the onshore and offshore markets last year to augment their loan books and at the same time support their respective expansion programs.

Big banks operating in the country raised P250.7 billion in 2018 by selling shares to existing shareholders via stock rights offering (SRO), while some issued various debt instruments such as fixed rate bonds, long-term negotiable certificates of deposits (LTNCDs), among others.

Metropolitan Bank & Trust Co. (Metrobank), founded by the late taipan George SK Ty raised P70 billion via a stock rights offer, followed by Ayala-led Bank of the Philippine Islands (BPI) which raised P50 billion in May.

Other banks that sold shares to existing shareholders include Yuchengco-led Rizal Commercial Banking Corp. (RCBC) with P15 billion and Aboitiz-led Union Bank of the Philippines with P10 billion.

Metrobank also became the first bank to shift to the issuance of bonds or commercial papers instead of LTNCDs, as pushed by the Bangko Sentral ng Pilipinas (BSP), raising P28 billion.

On the other hand, BPI also raised P25 billion via the issuance of fixed rate bonds due 2020.

Likewise, UnionBank issued fixed rate bonds due 2020 to raise P11 billion. The BSP has approved the revisions to rules and regulations relating to the issuances by banks of bonds and commercial papers prompting banks to veer away from LTNCDs.

Universal and commercial banks that issued LTNCDs include BDO Unibank Inc. of retail and banking magnate Henry Sy with P8.2 billion and sister firm China Banking Corp. with P10.25 billion.

Other banks include East West Banking Corp. with P2.45 billion, Metrobank P8.68 billion and thrift bank arm Philippine Savings Bank with P5.08 billion, Philippine Bank of Communications (PBCom) with P2.9 billion, RCBC with P3.58 billion, Gokongwei-owned Robinsons Bank with P1.78 billion, Security Bank Corp. with P5.78 billion, and UnionBank with P3 billion.

Big banks also tapped the offshore debt market and raised $1.6 billion or around P88.4 billion via their respective medium term note programs to be able to service their foreign exchange requirements.

BPI raised $600 million under its $2 billion medium term note program followed by UnionBank with $500 million, RCBC with $300 million, and Security Bank with $300 million.

Moody’s Investors Service earlier said the capital ratios of banks operating in the Philippines would remain pressured amid the strong growth in the banking industry’s asset expansion.

Simon Chen, vice president and senior analyst at Moody’s, said increases in retained earnings would not be sufficient to cover the banks’ rapid asset growth, against the backdrop of their low cost efficiency.

The debt watcher said the capitalization of most Philippine banks deteriorated last year as risk-weighted assets grew faster than internally generated capital.

“Without external capital raising, capital ratios will remain under pressure in 2018 from loan growth outpacing increases in retained earnings,” Chen said.

He said internal capital generation of Philippine banks is not strong enough to support rapid credit growth.