BDO to raise $1B in core capital

MANILA, Philippines - BDO Unibank Inc. (BDO) will boost its core capital by $1 billion through a rights offer, a move the universal bank of the SM Group said would “support its medium-term growth objectives and in anticipation of the more stringent Basel III capital guidelines of the Bangko Sentral ng Pilipinas (BSP).”

“This capital raising is intended to support the growth and expansion of the bank amidst the positive sentiment on the economy and at the same time, strengthen the bank’s capital position in anticipation of the new Basel III requirements,” Teresita T. Sy, BDO chairperson, said.

Under the global Basel III capital framework, the BSP is proposing to raise the minimum capital adequacy ratio (CAR) from the present 10 percent to 12.5 percent, as well as the doubling of the Tier 1 ratio from five percent to 10 percent starting January 2014.

Currently, BDO’s consolidated CAR and Tier 1 ratios are at 15.6 percent and 10.2 percent, respectively.

BDO officials further explained that the new capital would provide a sufficient buffer on top of the new minimum capital levels and allow BDO to sustain its growth momentum.

“The bank is optimistic about the outlook on the Philippine economy and hopes to continue with its faster-than-industry loan growth, driven by a strong consumer sector and opportunities in the SME, middle market and large corporate segments,” Sy added.

The approximately 1:3 rights offer will be offered at an indicative discount of 20 percent to 25 percent to market, which will allow all shareholders to proportionately participate in the capital-raising program.

Strategic investors SM Investments Corp. (SMIC), the International Finance Corp, and the United Overseas Bank (UOB) have expressed their support for BDO’s expansion plans and the proposed rights offer. The IFC is the private investment arm of the World Bank.

 “In fact, SMIC committed to subscribe to its proportionate share and is willing to underwrite the shares not taken up by the minority shareholders,” BDO added.