PSBank (PSB) Issuing Tier 2 Notes: What Does This Mean to an Investor?v
Jaycee De Guzman

Jaycee De Guzman

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Jaycee De Guzman

In a disclosure dated October 24, 2016, PSBank disclosed the approval of the BSP to call its Tier 2 notes amounting to P3 billion. Full disclosure is shown below:

THE PHILIPPINE STOCK EXCHANGE
3/F Philippine Stock Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City, Philippines 1226

ATTENTION: JOSE VALERIANO B. ZUÑO III
OIC – HEAD, DISCLOSURE DEPARTMENT

Dear Mr. Zuno,

Please be informed that the Board of Directors of Philippine Savings Bank noted the approval granted by the Bangko Sentral ng Pilipinas to exercise the call option on its Unsecured Subordinated Debt – Tier 2 Notes amounting to Php 3.0 billion issued in 2012. The exercise of the call option is allowed by BSP regulations after five years from the date of issuance or on 21 February 2017. 

In connection with this, the Board of Directors approved the authority of President Mr. Vicente R. Cuna, Jr. to sign, execute and deliver any and all documents and to do and perform any and all acts as may be necessary to carry into effect the intents and purposes behind the exercise of the call option for the PSBank Tier 2 Notes.

Thank you.

Very truly yours,

PERFECTO RAMON Z. DIMAYUGA JR.
SVP and Chief Finance Officer

What Is a Call Option?

A call option is a derivative which gives a right specific party to buy a security at a certain price. Last February 21, 2012, PSBank sold notes to investors amounting to P3 billion which carries a coupon of 5.75% per annum and is set to mature at 2022, but it has a provision to be called back after 5 years on 2017. This means that PSBank can buy back the notes starting 2017 onwards at their option. There is no legal obligation for them to do so, but in this case, they availed of this option.

The reason behind is that under Basel III guidelines, only Tier 1 and Tier 2 capital with loss absorption are allowed to be included in the capital adequacy ratio (CAR).

For the six months that ended June 30, 2016, PSBank has assets totaling P176.5 billion. Revenues are up to P7.6 billion from P6.5 billion a year ago. Net income is slightly up to P1.155  billion from P1.130 billion last year, a net increase of P25 million.

PSB closed at P92.90 per share as of October 24, 2016, down by 5.83% year-to-date. A cash dividend worth P0.75 per share has an Ex-Dividend Date of November 4, 2016.

Daily Chart

Since the last week of July 2016, PSB has been moving sideways between its support and resistance near P95.00 and P102.00, respectively.

Last January 2016, the support near 95 was tested. It was re-tested in August 2016. If and when this support level is breached, the next support level is near 89. Should PSB breach its immediate resistance near 102, its next resistance will be near 108.

For investors with a long-term horizon, please know that PSB is already moving below its 200-day SMA. It is in a bearish territory in a long-term perspective.

While the price is moving above its 10SMA and this shorter-SMA is moving above 20SMA, I am still not bullish on a short-term outlook due to a low volume. MACD’s crossing below the signal line added to my bearish short-term outlook on PSB.

PSB - PHILIPPINE SAVINGS BANK - Daily Chart - October 24, 2016

Foreign Fund Flow

On a 30-day trading period, PSB is on a Net Foreign Buying worth PHP48,375.00.

PSB - PHILIPPINE SAVINGS BANK - Foreign Fund Flow - October 24, 2016

Top 10 Players

Participants with a 100% Buying and Selling Activity from Oct-03-2016 to Oct-21-2016 at 03:30PM:

  • 4 out of 12 participants or 33.33% of all participants registered a 100% BUYING activity
  • 3 out of 12 participants or 25.00% of all participants registered a 100% SELLING activity
  • Top 10 Players’ Buying Average: 97.4991
  • Top 10 Players’ Selling Average: 97.5647

PSB - PHILIPPINE SAVINGS BANK - Top 10 Players - October 24, 2016

Volatility

PSB has a moderate risk level based on my proprietary risk calculator.

PSB - PHILIPPINE SAVINGS BANK - Volatility - October 24, 2016

Volume

PSB must register thicker daily volumes to regain its momentum to pierce the resistance near 102. If volume won’t improve and investors get tired of waiting, the price might draw closer to the support near 95.

PSB - PHILIPPINE SAVINGS BANK - Volume - October 24, 2016

Do you like this update?

I do hope I was able to help you through my analysis and simplified interpretation of data. Always have a trailing stop-loss to preserve your capital and to protect your gains.

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