The approval took some time because the GFI had to acquire the consent from several government offices including the Department of Finance, the National Economic Development Authority and Malacañang. The BSP had the last say and it finally approved the issuance after its legal people settled the guarantee issues.

Since Land Bank is a state bank, it has an automatic National Government guarantee in all its capital-raising endeavors. The BSP said as a Tier 2 issuance, the bank has to specifically include in its papers that it is waiving this guarantee.

In the meantime, Deutsche Bank is the issue underwriter. The Tier 2 issuance will beef up Land Bank’s capital.

For 2006 the bank is targetting a net income of P3.3 billion, ten percent higher from last year’s P3.019 billion — which exceeded target of P2.5 billion, and 46.6 percent more from 2004’s P2.25 billion.

In terms of deposit base, Land Bank is the country’s third biggest bank with P242.8 billion and fourth biggest in asset base and loans or P310.9 billion and P120.6 billion, respectively.

A bank’s capital is defined as comprising two tiers. Tier 1 is equity or core capital, which includes the book value of common stock, non-cumulative perpetual preferred stock and published reserves from post-tax retained earnings.

In the meantime Tier 2 also called supplementary capital is deemed of lower quality. It’s a loan that can be converted later into equity.

It included, subject to various conditions, general loan loss reserves, longterm subordinated debt and cumulative and/or redeemable preferred stock. A maximum of 50 percent of a bank’s capital could comprise Tier 2 capital.