BDO shares slip as $500M from dollar bond sale tests appetite

By Pierce Oel A. Montalvo, Reporter

BDO UNIBANK, Inc. was the most actively traded stock on the Philippine Stock Exchange (PSE) last week, with investors closely eyeing the bank’s $500-million bond sale, its first offshore debt issue in three years.

A total of 37.69 million BDO shares worth P4.89 billion changed hands over the week, according to PSE data. The stock closed at P131, down 0.4% from P131.50 a week earlier, underperforming the financial sector and the broader Philippine Stock Exchange index (PSEi), which rose 0.6% and 0.4%, respectively.

Compared with its P142.70 close on the last trading day of 2024, BDO’s shares were down 8.2%, slightly worse than the financial sector’s 7.1% decline and the PSEi’s 7.8% slump.

The bank raised $500 million through five-year dollar-denominated bonds, which were oversubscribed more than three times, attracting tenders totaling roughly $1.6 billion. The notes carry a 4.375% coupon rate. BDO’s last offshore bond issuance was a $100 million seven-year blue bond in May 2022, in partnership with the International Finance Corp.

Market analysts said the bond proceeds would strengthen BDO’s funding base and support loan growth while enhancing foreign currency liquidity.

“For this issuance to be profitable for shareholders, BDO needs to generate a return exceeding its 4.375% annual interest expense on the bond,” Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc., said in a Viber message.

“The bank must achieve a minimum return on the $500-million proceeds of at least 4.5-5%, considering not just interest costs but also issuance fees and foreign exchange hedging expenses,” he added.

BDO must earn more than the bond’s interest cost for the issuance to benefit its returns, said Luis A. Limlingan, head of sales at Regina Capital Development Corp. “Any return modestly above the coupon and related costs already avoids dilution to shareholder returns,” he said in a Viber message.

The funds are likely to be deployed toward higher-yielding dollar corporate loans, trade finance and treasury placements, Mr. Arce said.

However, refinancing risks loom for 2030 maturity bonds amid potential US Treasury yield spikes and widening emerging-market credit spreads. A weaker peso could also raise effective costs if hedging expenses increase.

Despite these risks, BDO’s A-level credit ratings, strong capital ratios and diversified funding base provide a buffer. Mr. Arce said the bank’s ability to roll over dollar assets offers a natural hedge against refinancing shocks, while maintaining liquidity and credit discipline will be key.

Investor sentiment around the stock was influenced by these dynamics, with market watchers citing mixed reactions to global and local economic signals. Softer November consumer data and Fed rate uncertainties added caution, though expectations of potential Bangko Sentral ng Pilipinas policy rate cuts have supported banking shares. The central bank reduced its policy rate to 4.75% in October, the lowest in over three years.

Support for BDO shares is seen around P125-P128, with resistance at P134-P140. Analysts said a break above resistance could push the stock toward P145-P150, while a breach of support could trigger a correction toward P120.