Banco de Oro Universal Bank said yesterday it is selling up to P15 billion in unsecured subordinated debt over a period of one year to increase capital and expand consumer lending.

The country’s second biggest lender also reported that it is absorbing its unit, Equitable Savings Bank to streamline operations. "Cost savings will be realized from unified branding and advertising, while the productivity of ESB’s outlets will be enhanced by the ability to offer a wider array of products as branches of a universal bank," Elmer Serrano, corporate information officer of BDO said.

BDO said the bond sale will be done in tranches, first at P5 billion to pay an existing $200 million Tier 2 debt callable July this year.

The bank said the board has approved the issuance during its Feb. 23 meeting. The sale is still to get approval from the Bangko Sentral ng Pilipinas.

The bank said it expects to grow its capital adequacy ratio from 15.3 percent as of fourth quarter of last year with the proceeds from the debt sale.

The Henry Sy-owned bank has appointed Hong Kong & Shanghai Banking Corp., ING Bank and Standard Chartered Bank as arrangers of the bond issue.

BDO also announced it posted an unaudited net income of P6.5 billion, slightly up by two percent from its pro-forma level of P6.4 billion in 2006.

The net income was below the P7 billion, expected by BDO, which completed its merger with Equitable PCI Bank in May last year.

BDO said it was not able to meet the target income because of the cost of integrating the two banks as well as settlement of taxes under the Bureau of Internal Revenue’s tax abatement program.

Nonetheless, the lender said the income grew on the back of the "beneficial impact of the merger, broad-based improvements in key business lines and a rebalancing in the asset and liability mix."

Last year, the lender said its net interest income went up by 11 percent to P21.4 billion given a better loan and deposit mix. It said customer loans expanded by 15 percent, driven by brisk demand for high-margin consumer loans, although net loans and other receivables were flat at P311.6 billion.

The bank said total deposits fell by five percent to P445.4 billion as it cut dependence on high-cost deposits.

Non-interest income, meanwhile, also declined by four percent to P16.9 billion with lower treasury and other income paring off gains from fee-based services. By contrast, the bank said service charges and trust fees rose by 14 percent to P9.6 billion helped by contributions from branch banking, remittances, credit cards, cash management and bancassurance.