BANCO de Oro Universal Bank, rated the country’s biggest lender, bared a plan on Friday to sell the first of a number of so-called subordinated debt issuances likely initially totalling P5 billion.

BDO president Nestor Tan said he has authority from the Bangko Sentral ng Pilipinas to sell as much as P15 billion worth of lower tier-two debt notes they plan to supplement the bank’s core or equity capital.

The general idea, Tan stressed, was to pace the capital-raising program given that BDO has enough internally sourced capital of its own even now.

“We will pace the issuance, as we have enough capital for the moment,” he said.

The bank’s capital adequacy ratio, a measure of ability to sustain losses without having to call for recapitalization, stood at 14 percent or well above the regulatory minimum of only 10 percent and only 8 percent as per the norm imposed by the Bank for International Settlements.

The fundraising campaign could take place over a one-year stretch depending on how BDO management will craft the program.

Tier-two note sales proceeds form part of a bank’s capital funds although in essence they are debt-originated securities. They are also interest-bearing securities structured as five-year IOUs in this case.

Tier-two notes allow banks to raise capital by borrowing the funds from external sources instead of asking their own shareholders to take out their wallets and put in the additional equity themselves.

Tan said BDO has hired global lenders HSBC and Deutsche Bank to arrange the capital-raising program on their behalf.

BDO aims to generate net income totalling P10.5 billion this year but has generated P2.44 billion in the first three months thus far.

The bank’s first-quarter performance represents income growth averaging 18 percent or right on target, Tan said.-- Jun Vallecera