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Union Bank of the Philippines is also planning to sell debt notes in its effort to generate up to P5 billion which it needs to be used as supplementary capital to support the growth of its resources. This was disclosed to by Union Bank president Victor Valdepeñas as he informs the Philippine Stock Exchange that the bank’s board has already approved the issuance of unsecured subordinated notes. The offering will be done as soon as Bangko Sentral ng Pilipinas (BSP) gives its nod to the bank.

Valdepeñas said that they are already preparing the offering although they haven’t selected any underwriter yet. The notes, which are classified as “lower tier 2” capital will be an interest-bearing note, and are only subordinate to the claims of the bank depositors and senior creditors.

The tier 2 notes will have a tenor of 10 years, with Union Bank having an option to redeem them on the fifth year. But if the bank opts not to exercise the call option, it will have to pay higher or “step-up” rate from the sixth year onward.

The notes will be issued as soon as possible, according to Valdepeñas, to cope with the fast expansion of its balance sheet. “Lending has been very strong both on the consumer and corporate side particularly as we get involved in big-ticket items like power and infrastructure. Because of the very fast growth in our resource base and increase in our loan resources, we need to make sure we are continually above the capital adequacy ratio (CAR),” Valdepeñas said.

Union Bank’s deposit base rose by more than 60 percent last year, according to Valdepeñas, which is the fastest in the industry, in spite of the lingering global financial turmoil. He said, “That means we need to buy assets and some of these assets will have an impact on our CAR.”