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Author Topic: BPI to retire Tier 2 notes  (Read 775 times)

hubag bohol

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BPI to retire Tier 2 notes
« on: August 23, 2013, 05:34:21 AM »
http://www.bworldonline.com/
Posted on August 22, 2013 10:01:45 PM


BANK of the Philippine Islands (BPI) will redeem P5 billion in lower Tier 2 notes in December to cut back on interest costs and prepare for new capital requirements under Basel III.

In its meeting on August 20, BPI’s board of directors agreed to exercise its call option on the lower Tier 2 notes issued in December 2008, with the redemption date set for December 13, 2013.

“We will redeem our Tier 2 notes. It is expensive for us and no longer compliant with Basel III,” Cezar P. Consing, the Ayala-led bank’s president and chief executive officer, said in an interview yesterday at the sidelines of the Annual Corporate Treasury & CFO Summit.

Banks have been retiring their lower Tier 2 notes after the Bangko Sentral ng Pilipinas (BSP) released in January the new capital requirements under Basel III -- a set of international standards devised after the 2008 global financial crisis to strengthen the industry’s ability to absorb shocks and manage risks.

The new capital framework will be implemented starting January 1, 2014, with Tier 1 and Tier 2 capital considered as the only compliant forms since they have loss absorption features. This means they are liquid and readily available, so banks do not need to rely on capital infusions from the public during times of shock.

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hubag bohol

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Re: BPI to retire Tier 2 notes
« Reply #1 on: August 23, 2013, 05:35:36 AM »
Universal and commercial banks, including their subsidiary banks and quasi-banks, must have a capital adequacy ratio (CAR) of at least 10%, with Tier 1 capital making up at least 7.5%. Tier 2 capital can account for the remainder.

Lower Tier 2 capital, as well as hybrid Tier 1 capital, will be “derecognized” as qualifying capital after December 31, 2015, the BSP said.

BSP Deputy Governor Nestor A. Espenilla, Jr. said last Friday that the recent moves of banks to retire their lower Tier 2 notes “make sense” since they trim interest costs.

“What is happening is some banks are exercising call options or are shortening the life of their existing Tier 2 notes because those debt papers were issued when interest rates were higher,” he had said.

After the redemption at the end of the year, BPI’s CAR will stand at 13.5%, BPI executive vice-president Antonio V. Paner said at the sidelines of the CFO summit. It will decline from the 14.3% notched in the first semester but it is still above the 10% minimum required by the BSP.

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hubag bohol

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Re: BPI to retire Tier 2 notes
« Reply #2 on: August 23, 2013, 05:36:36 AM »
TAPERING FEARS

Officials of the Ayala-led bank were optimistic of growth prospects this year, but they cautioned that volatility in the market triggered by the US Federal Reserve’s looming taper could hit trading gains.

Emerging markets have been hard-hit with foreign capital fleeing back to developed countries amid fears the well of easy money will dry up.

The Fed said it could reduce its $85-billion monthly bond-buying program within the year -- analysts predict the taper could begin by September -- amid signs the US economy is gaining traction.

“The most impact will be on trading gains. Banks will no longer have a huge trading income,” said Mr. Paner, also the treasurer of BPI.

“We will probably not double the first half income. A lot of the profit will come from the core intermediation business,” Mr. Consing added.

BPI’s net income rose by 27% to P12 billion as of June from the P9.4 billion a year ago. Interest income, driven by the lending business, grew 6%. But it was the 23% jump in non-interest income that drove BPI’s performance, with foreign exchange and securities trading surging 24% and 14%, respectively, among others.

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Re: BPI to retire Tier 2 notes
« Reply #3 on: August 23, 2013, 05:37:06 AM »
Alfonso L. Salcedo, Jr., BPI executive vice-president and head of corporate banking, said, “We’ve been talking about the second half. The battleground will really be in lending, both on corporate and consumer lending.”

“Among corporates, the sentiment is still optimistic. We continue to see industry loan growth to be mid-teens. This is probably sustainable, and in the medium or long term, that is healthy,” he said, adding that BPI’s corporate lending will probably be a “bit faster” than the industry average but will still be “around those levels.”

Mr. Salcedo noted growing interest in the Philippines among Japanese, Korean and American firms, particularly in the manufacturing sector.

“The renewed interest in economic zones is expanding and firms are moving some production lines from China and Thailand, adding the Philippines as another production center,” he said.

BPI shares closed at P89.10 apiece yesterday, down P5.30 from their close of P94.40 last Friday. Trading was suspended on Monday and Tuesday due to the heavy rains, while Wednesday was a holiday marking Ninoy Aquino Day. -- Diane Claire J. Jiao

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