BPI eyes issuing bonds more frequently

Ayala-led lender Bank of the Philippine Islands (BPI) on Wednesday said it is looking to issue bonds more frequently, even on a quarterly basis, to generate additional funds and to take advantage of the lower reserve requirement set by the Bangko Sentral ng Pilipinas (BSP).

According to BPI president and chief executive officer Jose Teodoro “TG” Limcaoco, the bank is looking at more issuances rather than just once a year or every two years, as has been done traditionally by banks.

“Because the BSP has lower reserves for bond issuances and because bonds are not deposits, you don’t have to pay PDIC, they have lower reserve requirements. The effective cost of a bond issue is lower than a time deposit,” he said in an interview in Makati City.

“The way we want to think about it is, can we be more regular about issuing bonds? Why do we have to wait one year? Why do we have to wait two years? Can we issue every quarter?” he added.

Limcaoco said BPI is looking at different kinds of bonds, including sustainable bonds, which are the most efficient. He added that bonds are more cost-efficient than time deposits.

“Could we do one-year bonds? Could we do three-year bonds? Could we do a year and a half? Could we do a year? I’m even challenging the team—could we do just three-month bonds like T-Bills? We don’t have to do 30 billion (pesos). We might just say, like every month 5 billion (pesos), 10 billion (pesos),” he said.

He was referring to the Treasury bills, which the government — through the Bureau of the Treasury — regularly auctions off on tenors such as 91 days or three months, 183 days or six months, and 364 days or one year.

“The secret now is that if you really want to drive the costs down for your loans, you also need cheaper funding, so that’s the way you do it — be as efficient in funding as possible,” Limcaoco said.

BPI this week shortened its Sustainable, Environmental, and Equitable Development (SEED) Bonds offering due to strong demand.

It is set to raise at least P5 billion through the 1.5-year papers, with an option to upsize. BPI has priced the papers at 6.2% per annum, payable quarterly, for a minimum investment of P500,000 and additional increments of P100,000.

The offer was originally set to run from July 19, 2024, to Friday, August 2, 2024, but was closed early on Thursday, August 1, 2024.

BPI treasurer Dino Gasmen said the latest issuance only had a reserve requirement of 1%, lower than the 9.5% requirement for regular deposits as part of incentives provided by the BSP.

“Even if I think policy rates go down, this will still give us an advantage. As a matter of fact, we want to offer this every quarter if it’s possible because of the advantage,” he said in the same event.

The Monetary Board of the BSP is next scheduled to meet on August 15 to discuss whether or not current conditions warrant a change in key monetary policy settings. BSP governor Eli Remolona Jr. previously said a cut in August was “somewhat more likely than before.” — VBL, GMA Integrated News