BDO TO RAISE $1 BILLION VIA SHARE SALE!

The country’s largest bank, Banco de Oro Unibank, is planning to beef up its tier 1 or core capital by as much as $1 billion through the sale of additional shares to existing investors.

“This capital raising is intended to support the growth and expansion of the bank amidst the positive sentiments on the economy, and to strengthen the bank’s capital position in anticipation of new Basel III requirements,” BDO chair Teresita Sy said in a disclosure to the Philippine Stock Exchange on Monday.

“Firm details on the proposed pricing, rights ratio and timetable will be disclosed once these are finalized,” she said.

Universal and commercial banks are required by the Bangko Sentral ng Pilipinas to adopt by Jan. 1, 2014, the capital adequacy standards under Basel III, which introduces a complex package of reforms designed to improve the ability of banks to absorb losses, extend the coverage of financial risks and have stronger firewalls against periods of stress.

The $1 billion core capital-raising planned by BDO is five times the minimum of $200 million that banking analysts say is needed to put it at the same level with peers Bank of the Philippine Islands and Metropolitan Bank and Trust Co. in terms of tier 1 capital.

With BDO’s planned capital-raising, it will keep its capital adequacy ratio (CAR) to risk assets to 12.5 percent from 10 percent and double its tier 1 CAR ratio to 10 percent from 5 percent effective January 2014 even if it were to expand its risk assets over the next two years.

Currently, BDO’s consolidated CAR and tier 1 ratios are at 15.6 percent and 10.2 percent, respectively. “The new capital will provide a sufficient buffer on top of the new minimum capital levels and allow BDO to sustain its growth momentum,” the disclosure said.

The bank said this capital-raising reflected its optimism on the Philippine economy and its hopes to continue with its faster-than-industry loan growth, driven by a strong consumer sector and opportunities in the small and medium enterprise, middle market and large corporate segments.

The estimated ratio for the rights offer is 1:3 which will be offered at an indicative discount of 20-25 percent to market will allow all shareholders to proportionally participate in the capital-raising program.