Tisco Bank plans $2-billion foreign currency debentures

Oranuch Apisaksirikul, chief executive officer of Tisco Financial Group, the holding company of Tisco Bank, said the bank proposed the notes with maturity of no more than 10 years to secure lower costs of funds amid the trend of lower interest rates. She added that the bank would issue the senior notes with short-to-medium maturity, expected to be two to three years, and the period of issuance would be considered again. 

“We asked for 10-year maturity, which is a long-term period, to eliminate the concern over the cost of funds. The interest rate in the market is more attractive after the [US] Federal Reserve announced QE3 [third round of quantitative easing], which will spur liquidity in the market,” Oranuch said.

She said the prospect of lower interest rates staying in the market for at least a few years was high because of the euro-zone debt crisis and uncertainty over the US economy.

The need for lower cost was a primary factor for the bank’s decision to issue foreign-currency senior unsecured notes rather than baht-denominated notes. 

The funds from the notes will be used to serve local customers, because even though they will be issued in a foreign currency, the funds raised will be converted to baht, while the overall cost will be lower than an unsub-debt issuance in terms of Thai baht, she explained. “The funds from issuing the foreign-currency senior bonds are aimed at serving local customers, unlike major banks that recently issued the same type of notes to support the expansion of foreign-currency lending,” she said. 

Kasikornbank recently issued foreign-currency senior unsecured notes worth $500 million, with five years and six months of tenor, to strengthen the bank’s liquidity stability in foreign currency and support long-term foreign-currency lending expansion as well as the bank’s overseas business.

The notes were issued to institutional investors in Singapore, Hong Kong and the United Kingdom. Notes issued via KBank’s Hong Kong Branch have been oversubscribed by 5.4 times.

At Tisco Bank, lending in the remaining months of the year is expected to continue to expand after it recorded more than 20-per-cent loan growth for the first eight months, Oranuch said.

She believes domestic car sales this year will reach 1.2 million units. Hire-purchase, or lease-to-own for auto purchase, is a key driver of the loan growth at Tisco Bank thanks to the government’s first-car-buyer tax incentive. Maybank Kim Eng Securities (Thailand) expects Tisco Financial Group to reach a new high in quarterly net profit from lending expansion as well as improved net interest margin. The brokerage forecasts that the group will report net profit of Bt1 billion for the third quarter.