RCBC eyes ‘regular’ bond issues to stay present in debt markets

RIZAL COMMERCIAL Banking Corp. (RCBC) may issue dollar bonds early next year as it looks to tap both the offshore and domestic debt markets on a regular basis, its top official said.

“It will probably be in the earlier part of the year, but we will obviously time it depending on US interest rates, which as you know will be influenced by November developments,” RCBC Chief Executive Officer Eugene S. Acevedo told BusinessWorld on the sidelines of an event on Wednesday.

He said the issue size could be smaller than the bank’s $400-million note issuance in January, but the final amount has yet to be decided.

“We don’t necessarily have to go big because we want to do this more regularly. I don’t know yet how much exactly, but I don’t think it’s a good idea to max out immediately because we don’t really need that much,” he added.

The US Federal Reserve will meet on Nov. 6-7 to review their policy stance. It will cut its key interest rate by 25 basis points (bps) next week, according to all 111 economists in a Reuters poll, with more than a 90% majority predicting another quarter-percentage-point move in December, Reuters reported.

Since the US central bank kicked off its long-awaited easing cycle in September with a half-percentage-point reduction in the federal funds rate to a 4.75-5% range, news on the economy has been strong, including consumer spending and jobs data.

The Fed’s next policy meeting is scheduled to start just after the Nov. 5 US presidential election, with opinion polls showing a neck-and-neck race but recent momentum behind Republican candidate Donald Trump.

All 111 economists in the Oct. 23-29 Reuters poll predicted the Fed will switch back to a quarter-percentage-point reduction next week. More than 90% of them, a total of 103, expected the same-sized move in December, taking the fed funds rate to a 4.25%-4.5% range.

RCBC on Tuesday upsized its medium-term note program to $4 billion from $3 billion and said that it will soon issue bonds under the program. It also appointed SMBC Nikko Securities, Inc. as the program arranger.

“It’s part of our regular funding plan. What we’d like to do moving forward is make it regular so that our investors get used to our papers being there on a regular basis, as opposed to the past where we would not be there all the time. So, this time, we want to have a more steady supply of our papers,” Mr. Acevedo said.

He added that the bank is also planning to issue peso-denominated bonds regularly starting next year as part of their new funding strategy to establish a regular presence in both foreign and local debt markets.

“We will also probably be doing something similar on the peso side. But depending on deposit growth, there’s a chance that we’d like to have a regular issuance,” Mr. Acevedo said. “That’s what we’d like to do moving forward — to issue more on a regular basis rather than just simply opportunistic. That’s really the change in the funding strategy… What I’m convinced of is that we have to do this on a regular basis — not exactly on tap, but as long as we make sure that our name is in the markets on a regular basis.”

“We don’t have anything in mind right now, but I anticipate that within next year, we will be doing something … to start a regularity in issuances. It’s not going to be a giant issue. We don’t even have a number in mind yet, but what’s more important to us is the regularity. Some bigger banks do something similar. Whether interest rates are high or low we will be issuing something. That’s really the general idea,” he added.

RCBC last tapped the foreign bond market in January, raising $400 million from an issuance of five-year senior unsecured sustainability notes. This marked its return to the overseas debt market after over three years.

The notes were issued out of the bank’s medium-term note program, with the proceeds set to finance and refinance its consumer loans and its operating activities for eligible green and social categories in line with the RCBC’s Sustainable Finance Framework.

Meanwhile, the bank last tapped the local debt market in March 2022, where it raised P3 billion from ASEAN sustainability bonds. This represented the seventh tranche of RCBC’s P100-billion bond and commercial paper program, which still has an unissued balance of P27.96 billion.

RCBC’s net income declined by 12.97% year on year to P2.25 billion in the second quarter amid increased tax expenses.

Its shares closed unchanged at P26.90 apiece on Thursday. — Aaron Michael C. Sy with Reuters