BankCom Plans Second Bond Sale to Fund Growth Amid Cautious Lending

Funding Strategy Amid Rate Uncertainty

Bank of Commerce is preparing to return to the Philippine domestic bond market in the second half of 2026, less than two years after completing its largest-ever debt offering. The San Miguel-backed lender raised ₱18 billion through a bond sale in 2025, and chief financial officer Antonio Laquindanum confirmed plans for a follow-on issuance during an investment conference.

The move comes as BankCom seeks to strengthen its funding base while navigating a challenging environment marked by elevated borrowing costs and regional geopolitical tensions. Laquindanum said the planned transaction would diversify the bank's liability structure and support future growth initiatives without compromising its capital position.

BankCom's approach reflects a broader trend among mid-tier Philippine banks seeking alternative funding sources as deposit competition intensifies and loan demand remains muted. The lender has deliberately slowed credit expansion in recent quarters, prioritizing net interest margin preservation over volume growth.

Profitability Over Volume

The bank's loan book and investment portfolio both contracted slightly in the first half of 2026 as management increased liquidity buffers in response to volatility linked to Middle East tensions. Despite the shrinking balance sheet, BankCom's net interest margin climbed to a record 4.68 percent from 4.35 percent at the end of 2025, according to Laquindanum.

He emphasized that the bank has chosen to maintain pricing discipline rather than chase market share. "Given our size, it's a more important priority for us to maintain our margins and our return on equity," Laquindanum said. The lender still targets modest loan growth by year-end, but only where returns justify the risk.

The strategy has delivered results. BankCom reported net income of ₱2.11 billion for the first half of 2026, up 13 percent from ₱1.86 billion in the same period a year earlier. Return on equity reached a record 11.56 percent, well above the Philippine banking sector average.

Management acknowledged that funding costs and shifting rate conditions could pressure margins in the second half, but expects the full-year net interest margin to remain above 2025 levels.

Ecosystem Play

BankCom is leaning into its relationship with parent San Miguel Corporation to drive medium-term growth. The bank has onboarded more than 3,500 accounts within the San Miguel ecosystem as of June, representing nearly 60 percent of an expanded target market of approximately 6,000 potential clients.

That target market has grown from an earlier estimate of 4,000 clients after the bank refined its data analysis and identified additional prospects across San Miguel's diverse operations, which span food and beverage, energy, infrastructure, and logistics.

The next phase involves converting these ecosystem accounts into active borrowers and users of ancillary products, including cash management, payroll, and trade finance facilities. The captive client base offers BankCom a differentiated growth avenue in a crowded market, reducing reliance on price-sensitive corporate lending.

Branch-Lite Expansion

To extend its physical reach without incurring the full cost of traditional branch infrastructure, BankCom is prioritizing branch-lite units. These smaller outlets target areas with San Miguel ecosystem clients that fall outside the bank's existing footprint.

The branch-lite model allows the lender to establish a presence and build relationships in new markets at a fraction of the cost of a full-service branch. If demand warrants, these units can later be upgraded to offer a complete range of banking services.

The strategy aligns with broader industry efforts to balance digital transformation with the enduring demand for physical touchpoints, particularly among corporate and SME clients that value in-person relationship management.

Market Context

Philippine banks are navigating a complex operating environment. The Bangko Sentral ng Pilipinas has held policy rates steady after a series of hikes in 2022 and 2023, but elevated rates have dampened loan demand across both consumer and corporate segments. At the same time, deposit competition has pushed up funding costs, squeezing margins for lenders unable to reprice their loan books.

Mid-tier banks like BankCom face additional pressure from universal banks with deeper balance sheets and digital-only entrants offering higher deposit rates. Bond issuance offers an alternative funding channel, allowing banks to lock in longer-term liabilities and reduce reliance on volatile deposit markets.

BankCom's planned issuance will test investor appetite for Philippine bank debt in the second half, particularly as global rate uncertainty persists and regional credit conditions remain uneven. The lender's improved profitability and return metrics may support pricing, but execution will depend on broader market sentiment and competing supply.