UNIONBANK of the Philippines, Inc. on Thursday listed its P11-billion digital peso bonds on the Philippine Dealing and Exchange Corp. (PDEx) for trading in the fixed-income market.
“This pioneering issuance serves as a building block in UnionBank’s journey to embrace digitization and positive disruption in the industry. I am confident that this will be recognized globally as a game-changing digital initiative in the field of finance,” UnionBank Treasurer and Head of Global Markets Jose Emmanuel U. Hilado said during the listing ceremony on Thursday.
The P11 billion in digital bonds were issued out of UnionBank’s existing P39-billion bond program.
The bank’s digital bonds have a 1.5-year tenor and consist of Series E papers due 2023 with a fixed interest rate of 3% per annum.
The joint lead arrangers and bookrunners for the transaction were The Hongkong and Shanghai Banking Corp. Ltd. and Standard Chartered Bank. They were also the selling agents along with UnionBank.
The digital bonds were issued through the Proof of Concept (POC) Digital Registry and Digital Depository of the Philippine Depository & Trust Corp.
“For this POC live test, originally targeting P1 billion among 200 bondholders, Team UnionBank of the Philippines and its underwriters went all in to issue at least P11-billion worth of bonds to 893 bondholders. Now we trust that such commitment removes any doubt that UnionBank is indeed the proverbial tip of the digital spear,” PDEx President and Chief Executive Officer Antonino A. Nakpil said.
The POC uses distributed blockchain technology for registry and depository operations.
“We hope to learn from this experience and determine efficiencies to enable a harmonious technological framework for these bonds. I am optimistic that with this latest development in our capital markets, through these joint efforts, we can catapult the country to become one of the leading and most technology innovative markets in the region,” Securities and Exchange Commission Commissioner Kelvin Lester K. Lee said.
Blockchain uses fully digital and decentralized ledgers to record transactions. This distributed ledger also serves as the platform where virtual currencies are transacted.
The storage units used in blockchain are continuously updated and secured using cryptography, making data management and other data-driven processes decentralized, tamper-proof and more transparent.
Use cases in the financial industry that involve blockchain technology include fraud reduction, Know-Your-Customer processes, trading platforms, and even payments.
UnionBank began its first successful enterprise blockchain application in 2018 with the launch of their blockchain platform for general circulars, Mr. Hilado noted on Thursday.
“And then we created Project i2i, a financial inclusion project, using distributed ledger technology. We launched a Bitcoin ATM (automated teller machine) in our branch called The ARK and issued our own stablecoin called PhX in 2019. In 2020, we successfully completed a proof of concept with Standard Chartered Bank for the issuance of our retail bond on a digital platform,” he said.
UnionBank recorded a lower net profit in the first three months of the year as trading gains normalized. Its net income dropped by 45% to P2.6 billion in the first quarter from P4.72 billion in the same period of 2021.
Shares in the Aboitiz-led bank increased by 3.7% or P3 to P84 on Thursday from the P81 close on Wednesday. — Keisha B. Ta-asan