BDO not in a hurry to tap fresh capital for lending

TOKYO, Japan – BDO Unibank Inc., the largest bank in the Philippines, is not in a rush to tap fresh capital for its lending business, the bank’s top executive said.

While the banking unit of tycoon Henry Sy’s SM Group has adequate funds, the lender can raise as much as $2 billion through the issuance of Euro Medium Term Notes (EMTN) when the need arises.

“We have adequate funding so there is no need for [the EMTN] now,” BDO president Nestor Tan said in a chance interview on the sidelines of the International Monetary Fund-World Bank Annual Meetings here.

“But in the future, as we expect loan demand to pick up, then we may have to raise some money to manage our funding profile,” Tan added.

In August, BDO announced a plan to establish a $2-billion EMTN program as part of the bank’s liability management initiatives to tap longer-term funding sources and lower funding costs.

The EMTN program is a medium-term foreign currency funding facility that will give BDO the flexibility to issue foreign currency denominated notes, from time to time, in the international capital markets.

But to date, nothing is at the pipeline for the new fund-raising scheme as the bank has enough capital, Tan said.

“It is just a program that we set aside. Fund-raising will happen when we need it,” Tan said.

In July, BDO secured core capital through a 1:3 rights offer to support its medium-term growth objectives and meet the Basel III capital requirements ahead of schedule. Basel III is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk.

Tan said BDO will depend on loan growth, which will prompt the issuance of the EMTN.

BDO earlier said it is confident of hitting a loan growth of 20 percent in the next three to five years.

Tan said such growth will be driven by the launching of more Public-Private Partnerships (PPP), the flagship infrastructure program of the Philippine government.