EastWest Bank completes P1.25-B Tier 2 notes issue

EastWest Banking Corporation has completed the issuance of Tier 2 capital notes worth P1.25 billion at an effective rate of 8.625 percent.

"Our vision is to grow the bank and make it an active player in the market," Antonio C. Moncupa Jr., president and chief operating officer of EastWest Bank, said.

The fresh capital will support the bank's expansion program, which includes possible acquisitions or mergers.

The issue will likewise improve the bank's capital adequacy ratio (CAR) from 14 percent to 18 percent. The Bangko Sentral ng Pilipinas (BSP) requires a minimum CAR level of 10% among local banks.

HSBC managed the notes issuance, which had a guiding rate of five years. The call option allows issuer EastWest Bank, to redeem the instruments from the investors five years after the issue date. Non-exercise of the call option extends the tenor of the capital notes to 10 years but with a step-up rate for the investors.

EastWest Bank is on a three-year expansion program aimed at bringing its branch network to 120 by 2010.

Moncupa said the market positively responded to the issue, which was closed shortly after the government floated its retail treasury bonds (RTBs) that solicited some P77 billion in total sale.

The float meets the requirement of the market for more investment options as the securities as well as the fixed income markets remained sluggish. That is also evidenced by the way the three-year and five year (RTB) issued by the National Treasury were oversubscribed.

Moncupa said the timing of the float was perfect, citing the expectation of a continued rise in interest rates on the back of the spiraling inflation rate, which both market practitioners and regulators said could surpass the 11.4 percent rate in June, the highest in the last 14 years.

"While (interest) rates have slightly come off in the last few days, we anticipate an uptick due to inflation," he said.

At the end of 2007, EastWest Bank reported assets worth P38.7 billion and outstanding capital of P4.4 billion.

EastWest Bank is ranked 19th among local commercial banks in terms of assets, capital and deposits. In terms of loans it ranked 17th and 27th in terms of return on equity (ROE).