BPI considering options to refinance $300-M debt

The Bank of the Philippine Islands (BPI) said on Thursday it is now looking at either returning to the debt market or securing a loan from a multilateral lender to refinance its $300-million debt set to mature in September.

According to BPI chief finance officer (CFO) Eric Luchangco, the Ayala-led lender is considering the cost efficiency of both options and weighing which would be better to undertake given the prevailing market conditions.

“It’s not 100% decided. We continue to look at our options, and I think at this point, time is on our side because maturity isn’t until September, so between now and September, we’ll just continue to watch the situation and see what our opportunities are,” he told reporters in Makati City.

Luchangco said BPI wants to maintain a diversified funding base and does not want to go back to the same bank every time, as this may close relationships with other lenders.

He did not specify a timeline for the planned refinancing but said that the bank has flexibility as it can refinance months ahead of September, but this would mean carrying two costs at the same time.

“If it looks like it’s a very good opportunity to refinance now and we can get it now, then maybe it’s worth it to have that negative carry,” he said. 

“The ideal market condition is the one that I think we can get the best funding efficiency, and so that is a combination of where we think rates are, where we think they’re going to be, and where we think market demand is, like today versus where we think it’s going to be, and it’s always kind of a balancing act,” he added.

Luchangco also noted that should the bank refinance earlier than September, there would be value in knowing what it would get rather than being uncertain about waiting three months from now.

BPI last year did two dollar-denominated loans—a syndicated loan and another from the International Finance Corp. (IFC).

The company reported a 30.5% increase in its net income for 2023 to P51.7 billion, as its revenues climbed 16.7% to P138.3 billion. Net interest income grew 22.7% to P104.4 billion.

Total loans for the past year stood at P1.9 trillion, reflecting 10.5% annual growth on the back of the growth across all portfolios, which Luchangco said is expected to be surpassed this year.

“(We’re expecting) a little higher than last year. I think this year will work out stronger than that, driven by stronger demand. Loan growth is very much linked to economic growth,” he said.

The inter-agency Development Budget Coordination Committee (DBCC) targets Philippine economic growth at 6.5% to 7.5% this year, lower than the previous target range of 6.5% to 8.0%.

Moving forward, Luchangco said BPI expects the Bangko Sentral ng Pilipinas (BSP) to start cutting rates by as early as July should inflation remain largely under control.

The central bank’s benchmark rate is currently at a 16-year high of 6.5% to tame down inflation. Higher rates generally slow down the growth of the money supply, as they increase the cost of credit.

“There are many things that are expected to affect our margins, so the rate effects are one thing, but beyond that, there’s also the change in the composition of our loans,” Luchangco said.

“We’re also looking to increase the percentage of consumer loans in our loan book, and consumer loans are higher-yielding loans, so that will kind of lift up the interest rate earned by the bank,” he added. —VBL, GMA Integrated News