PHILIPPINE Savings Bank (PSBank), the thrift bank arm of the Metrobank Group, will be raising P10 billion in fresh funds from the debt market to take advantage of the prevailing low interest rates.
In a disclosure to the Philippine Stock Exchange, PSBank said its board of directors approved on Friday the planned issuance of P10 billion worth of long-term negotiable certificates of time deposits (LTNCTDs).
The P10 billion LTNCDs will be issued “through one or more tranches over a period of one year.”
“PSBank stands to benefit from the LTNCTD issuance due to continued liquidity and low interest rates in the market,” the thrift bank said.
“The LTNCTDs will provide an alternative investment outlet for PSBank’s existing clients and depositors,” it added.
Selling LTNCDs is a way for banks to raise funds, usually in huge amounts. The bank is obliged to pay the face value of the certificate upon maturity, and produce periodic coupon or interest payments during the life of the deposit.
As an investment, LTNCDs are tax-exempt for qualified individuals or institutions if held for at least five years and are insured by the Philippine Deposit Insurance Corp. (PDIC) for up to P500,000.
PSBank said the issuance is still subject to the approval of the Bangko Sentral ng Pilipinas while its final terms, including the offering period and interest rates, will depend on market conditions.
Local banks are taking advantage of the low interest rate environment before the anticipated US Federal
Reserve interest rate hike by the end of the year, which in turn can affect policy rates around the globe.
PSBank seeks to grow its customer base and loan books by ramping up its mobile and online banking segment.
As of end-2015, the bank was operating 248 branches. The George Ty-led bank is the second largest thrift bank in the country in terms of assets, net loans, deposits and capital, with P169 billion of total assets in 2015.