The largest banking network in the country, BDO Unibank (BDO), is set to raise P60 billion in fresh capital to support the lender’s medium-term growth objectives and to meet higher capital requirements.
In a disclosure to the Philippine Stock Exchange on Monday, BDO said its Board approved the move to raise additional capital through a stock rights offering.
“The fresh capital will support the bank’s medium-term growth objectives amid the country’s favorable macroeconomic prospects, and provide a comfortable buffer over higher capital requirements with the forthcoming imposition of the Domestic Systemically Important Bank [D-SIB] surcharge,” the bank said.
According to Bangko Sentral ng Pilipinas (BSP), the D-SIBs framework is in line with the initiatives pursued under the Basel 3 reform agenda. D-SIBs are characterized as banks whose distress or disorderly failure would cause significant disruptions to the wider financial system and economy.
As of end-June, BDO’s consolidated Common Equity Tier 1 (CET1) ratio and Capital Adequacy Ratio of 11.3 percent and 13.1 percent, respectively, are above the current regulatory minimum levels, even with the gradual implementation of the D-SIB surcharge.
The Sy-led lender said the additional capital will allow BDO to sustain its momentum and take advantage of the country’s growth opportunities. Over the past five years, the BDO’s customer loan portfolio grew at a 19-percent compounded annual growth rate (CAGR), outpacing the industry’s 17 percent CAGR.
“Going forward, the bank hopes to further expand its presence in emerging growth areas particularly the consumer, provincial middle market and SMEs and the underserved segments, as well as in infrastructure-related lending/project finance in line with the government’s thrust to promote countryside development and ramp up infrastructure spending,” the bank said.
The BSP said it will update the list of D-SIBs every year and each bank will be individually notified of their classification. Banks identified as D-SIBs will be required to maintain additional CET1 of between 150 and 250 basis points of the lender’s Risk-Weighted Assets. The higher capital requirements, however, will be staggered beginning January 2017 until the same are fully in place by January 2019.
SM Investments Corp. (SMIC), the controlling and majority shareholder, has expressed its full support for the bank’s expansion plans and the rights offer.
Once finalized, details on the proposed pricing, rights ratio and timetable will be disclosed to the public.
“SMIC commits to subscribe to its proportionate share and is willing to underwrite any shares not taken up by minority shareholders,” the disclosure said.