BDO Unibank Inc. (BDO), the largest Philippine lender, dropped the most in more than five months on plans to raise as much as $1 billion in the nationâ€™s biggest share sale to boost funds ahead of stricter capital guidelines.
BDOâ€™sÂ boardÂ approved a plan to boost core capital through a one-for-three rights offer that may be sold at a 20 percent to 25 percent discount, the lender said in aÂ statementÂ to the Philippine Stock Exchange yesterday, without providing details on the timing of the sale. The additional capital anticipates more stringent requirements of the Basel III accord and provides a â€œsufficient bufferâ€ for the bank to expand, it said.
Bangko Sentral ng PilipinasÂ proposes increasing banksâ€™ minimum capital adequacy ratio to 12.5 percent from the current 10 percent and doubling the Tier 1 ratio from 5 percent effective January 2014, BDO said yesterday. BDOâ€™s capital adequacy ratio is currently at 15.6 percent and Tier 1 at 10.2 percent, it said.
â€œThe market can absorb the size of the sale considering itâ€™s among the countryâ€™s top three biggest universal lenders and given the liquidity at home and abroad,â€ said Rico Gomez, who helps manage about $1.52 billion at Manila-based Rizal Commercial Banking Corp. â€œItâ€™s taking advantage of the low interest environment and the abundant liquidity in financial markets. Itâ€™s a very smart move to do this now.â€
BDO shares fell 5.5 percent to 61.90 pesos as of 11:00 a.m. inÂ Manila, heading for the biggest loss since Sept. 23. The stock sank as much as 6.9 percent earlier today. The decline pared the gain this year to 4.9 percent, compared with a 17 percent advance in the benchmarkÂ Philippine Stock Exchange Index. (PCOMP)
Record Low Rates
Bangko Sentralâ€™s benchmark overnight borrowing rate is at 4 percent, a record low. Funds in the central bankâ€™s overnight and special deposit accounts, a gauge ofÂ surplus cash, climbed to almost 1.86 trillion pesos ($43.5 billion) in the week ended March 16.
Cebu Air Inc. (CEB), the largest Philippine budget carrier, held the nationâ€™s largest share sale when it raised $539 million in an initial public offering in 2010, in dollar terms.
InvestorsÂ SM Investments Corp. (SM), International Finance Corp. andÂ United Overseas Bank Ltd. (UOB)Â support the plan, BDO said. SM Investments, which owns 50.3 percent ofÂ BDO, will subscribe to its proportionate share and buy stocks not taken up by other shareholders, the lender said.
â€œThe rights offer should be compensated by growth moving forward,â€ said Erwin Balita, an analyst at SB Equities Inc. â€Itâ€™s pretty timely. Everybody embraces a rights offer in a bullish market.â€
Net income rose 19 percent to 10.5 billion pesos in 2011 after loans rose 24 percent to 670.1 billion pesos, BDO said in February.
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