BDO Unibank Inc., the largest lender controlled by tycoon Henry Sy, will raise P60 billion in capital from a rights offering to support the bank’s growth.
“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 [DSIB] surcharge,” BDO told the stock exchange Monday.
“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 bank’s customer loan portfolio grew at a 19 percent compounded annual growth rate, outpacing the industry’s 17 percent CAGR,” it said.
BDO said it planned to 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.
BDO’s consolidated common equity tier 1 ratio and capital adequacy ratio reached 11.3 percent and 13.1 percent, respectively as of end June, above the regulatory minimum levels, even with the gradual implementation of the DSIB surcharge.
Domestic systemically important banks are those lenders whose distress or disorderly failure would cause significant disruptions to the wider financial system and the economy. Bangko Sentral completed its determination of these banks following the framework released in October 2014.
Banks were classified depending on the extent of their systemic importance using pre-defined indicators for size, interconnectedness, substitutability and market reliance as a financial market infrastructure and complexity.
Those identified as D-SIBs will be required to maintain additional common equity tier 1 of between 150 and 250 basis points of the bank’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., the controlling and majority shareholder, expressed full support for the BDO’s expansion plans and the rights offer. SMIC committed to subscribe to its proportionate share and is willing to underwrite any shares not taken up by minority shareholders.
“Details on the proposed pricing, rights ratio and timetable will be disclosed once these are finalized,” BDO said.
BDO is a full-service universal bank which provides a wide range of corporate, commercial and retail banking services. These services include traditional loan and deposit products, as well as treasury, trust banking, investment banking, private banking, rural banking, cash management, leasing and finance, remittance, insurance, retail cash cards and credit card services.