Banks see no urgent need to tap debt markets

MANILA, Philippines — Philippine banks see no immediate need to tap the domestic and foreign debt markets this year after raising enough funds at the height of the COVID-19 pandemic last year.

Security Bank president and chief executive officer Sanjiv Vohra said the bank needs to properly plan and time any fund raising activity amid the ample liquidity in the financial system.

“The low level of rates and high level of liquidity seem to point us to a condition that is very ripe for raising any long-term funding. However, we will have to properly plan and time it such that we would only do it when there is a clear expectation of loan volume firming up,” Vohra told The STAR.

“From a macro perspective, what we are seeing in terms of interest rate is currently a relatively flat yield curve. The market is fairly liquid and is expected to remain rather quite liquid for the coming quarters, if not the entire 2021,” Vohra said.

The bank’s capital adequacy ratio (CAR) improved to 19.9 percent in end-September last year, while its common equity tier 1 (CET1) ratio also increased to 19.1 percent.

Security Bank raised P13.5 billion July last year through the issuance of fixed-rate peso bonds and P2.07 billion via the issuance of long-term negotiable certificate of deposits in February 2020 to extend the tenor of its liabilities and augment its lending business.

It last tapped the offshore debt market in September 2018 when it raised $300 million via the issuance of five-year unsecured fixed rate notes.

Likewise, BDO president and CEO Nestor Tan said the country’s largest lender has no debt or capital raising plans at the moment.

“The growth in our funding sources is more than adequate, while our capital ratios are comfortably above regulatory requirements,” Tan told The STAR.

BDO raised $600 million through the issuance of 5.5-year notes to support its dollar-denominated projects.

BDO also tapped the domestic bond market, raising P40 billion in February last year and another P36 billion in July 2020 via the issuance of bonds due 2022 that were listed on the Philippine Dealing & Exchange Corp. (PDEx).

Cezar Consing, outgoing president and CEO of Bank of the Philippine Islands, said the Ayala-led lender would remain opportunistic and exhaust all funding alternatives to raise much needed funds for small and medium enterprises (SMEs).

“While there are no borrowing plans at the moment, we are prepared to be opportunistic if attractive funding alternatives present themselves. Our most recent fund raising was designed to allow us to do more lending to SMEs,” Consing said.

Last August, BPI raised P21.5 billion through the issuance of the first ever COVID Action Response (CARE) bonds to help micro, small and medium enterprises (MSMEs) recover from the impact of the   pandemic.

It also raised P49.22 billion under its P100-billion bond and commercial paper program, including P15.32 billion through the issuance of two-year peso fixed rate bonds in January last year and P33.89 billion in March last year.

In the offshore debt market, the bank raised $300 million in September 2019 as it became the first Philippine bank to issue   dollar-denominated ASEAN green bonds. It also raised 100 million Swiss francs from its maiden ASEAN green bond issuance to bankroll green eligible projects.

Philippine banks continued to sacrifice profits as it beef up their provisions for bad loans in anticipation of higher loan defaults due to the impact of the COVID-19 pandemic.