SECURITY Bank Corp. said on Tuesday it will be raising as much as P20 billion in fresh funds through the issuance of long-term negotiable certificates of time deposit (LTNCD) to fund its asset growth and lengthen the maturity profile of its liabilities.
“This is to inform the Exchange that the Board of Directors of Security Bank Corporation, in its meeting held today, August 29, 2017, approved the issuance of up to P20 billion Long Term Negotiable Certificates of Deposit, subject to regulatory approval,” the lender said in a disclosure to Philippine Stock Exchange.
Security Bank Chief Executive Officer Alfonso Salcedo, in a message to reporters said: “The purpose of the fund-raising activity is to fund the asset growth of the Bank and lengthen the maturity profile of our liabilities.”
“Regarding the timetable, this will depend on the time we obtain the BSP [Bangko Sentral ng Pilipinas] approval; the first tranche would likely be around October/November this year. First tranche might be around P5 billion to P10 billion,” he, nevertheless, said.
“Regarding tenor of the paper, we have yet to determine the tenor. This would be at least longer than five years, but not beyond seven years,” he added.
LTNCD issuances are subject to approval of the central bank. LTNCDs are time deposits that have longer maturity and are higher yielding than regular deposits. These instruments are negotiable and are insured with the Philippine Deposit Insurance Corp. up to the maximum coverage, which is currently at P500,000 per depositor.
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.
Security Bank reported an 8-percent growth in net income to P5.24 billion for the first half of 2017, from P4.85 billion a year earlier, driven by robust net interest income during the period.