This article didn’t make much of a splash in the news as it looked like a simple product PR blah, but for most people who follow personal finance developments, it’s a sign banks are (finally) admitting Filipinos are tired of plain-vanilla deposit products and are looking for better returns on their money.
The article talks about AIG Philam Savings’ 5-year long-term negotiable certificates of deposit launched Wednesday.
Pulitika, Kalakalan, ATBP. pointed out that UITFs are declining in volume because of LTNCDs. There must be a huge volume of cash being shifted, because as of now, only two universal banks and one thrift bank has issued LTNCDs – BDO, BPI and AIG Philam Savings Bank.
AIG Philam is offering P3 billion worth of LTNCDs over a 12-month period, P1 billion in July. The bank will pay interest quarterly, unlike previous LTNCD offers. This offering will be tax-free if held until maturity or until 2012. Interest is fixed at 7.25% per annum.
LTNCDs are bond-deposit hybrids, so they are less risky than stocks. They are guaranteed by the PDIC up to P250,000 per depositor. They are negotiable, meaning they can be sold before maturity but once that’s done, goodbye favorable tax treatment.
At 7.25% per annum, AIG Philam’s LTNCD (only banks will name a product that way!) gives slightly higher returns compared with time deposits
The 5-year Retail Treasury Bond gives 7.125%, so there’s not much difference there. By the way, the Bureau of Treasury’s public offering of RTBs close on Monday.
All told, you don’t need to be a rocket scientist to know that LTNCDs may deserve a “good” rating and it could even be “very good” depending on the issuer. But “superior”? Not really.
November 25th, 2007 at 8:18 am
Sana naman meron tier 2 na 250K minimum…
August 5th, 2007 at 5:40 pm
Central Bank recently approved BDO-Pci to issue Tier II, i saw it in the news today…… i hope thier Tier II will offer interest rate of around 10 - 12, masyado namang mababa kung 9 and sana like in Leo’s tier II with security bank, i hope thier minimum is 500K too…..
August 3rd, 2007 at 11:18 am
The minimum investment for an individual investor is 500K. Maturity is 10 years but callable option is 5 years. If investment is held for 5 years + 1 day the earning is tax free. Just the other day DBP is reported it will soon issue another tranche of tier-2 notes.
August 3rd, 2007 at 6:35 am
hi leo, what is the minimum placement for a tier note? I assume it’s also tax free.
July 31st, 2007 at 11:05 am
Salve,
LTNCDs are worthwhile for individual investors with 500K or more which they “will not” use during the next 5 years + 1 day. I hope the bank sellers stop talking about option to sell prior to maturity date unless they can fully explain how this secondary market works (is there really such a secondary market?). I invested in Security Bank tier-2 unsecured subordinated bank notes in 2004 (callable in 2009 with 12% annual rate payable twice a year). Between LTNCDs and tier-2 notes, I am inclined to put my “extra cash” for the next 5 years into the latter. I think the most recent DBP and PSBank tier-2 notes give a 9% to 10% annual return.