How to Invest in LTNCDs in the Philippines

Last Updated – Aug 15, 2022 @ 8:31 am

Do you want your money to grow in a safe yet fast way?

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Stupid question – of course, you do!

If you want to bet your money on something immensely safer than cryptocurrency, starting a business, or the stock market, putting it in a regular savings account will not be enough.

After all, the interest rate you’ll earn there would soon be overtaken by the rate of inflation.

A Long-Term Negotiable Certificate of Deposit (what a mouthful – let’s just stick to LTNCD for now) enables your portfolio to have more security. Although it doesn’t give you mind-blowing returns, it’s still worth considering.

Since 2014, banks in the Philippines have issued this lesser-known investment instrument with an annual interest of roughly 3.75% to 5.375%.  

But what is it? Is it a wise idea to invest in LTNCDs in the Philippines? How can you invest in one? Will it be enough to earn passive income?

In this guide, we’ll teach you everything you need to know about it.

What is LTNCD?

An LTNCD or a Long-Term Negotiable Certificate of Deposit is a bank deposit offered by banks to investors looking for a safe investment option. It has more decent interest rates compared to short-term time deposits and traditional savings accounts. 

The Bangko Sentral ng Pilipinas mandates LTNCDs to be denominated in Philippine pesos and it must have a minimum of five years before it matures.

An LTNCDs must also be scripless in form, as well as registered with a third-party Registry Bank maintaining an Electronic Registry Book.

Related Guide: How to Invest in UITFs in the Philippines


Features of an LTNCD

To help you further understand what an LTNCD is, let’s break it down by discussing each word in the acronym.

It is Long-term.

As mentioned above, the Bangko Sentral ng Pilipinas mandates LTNCDs to have a minimum of five years before it matures. Its maturity/tenor starts from its issue date. 

It is Negotiable.

LTNCDs can be sold in the secondary market even before their maturity date. Therefore, it is liquid. However, the process can be time-consuming and takes a lot of paperwork.

Certificate of Deposit.

Similar to Certificates of Deposits, LTNCDs earn interest, and it’s also a debt instrument. 

It is a bank deposit product.

You can look at LTNCDs as a hybrid of time deposits and bonds. Similar to a time deposit, it needs a certain time before it matures, and just like bonds, LTNCDs are negotiable and have quarterly interest gains. 

Other features of LTNCDs:

  • LTNCDs usually have an offer period issued by banks (the issuer). 
  • This investment instrument usually has a minimum investment/required starting capital of Php50,000 or more, depending on the issuer.
  • You can add more money to your LTNCDs. The increments depend on the issuer. Usually, this falls between Php10,000 to Php100,000.

How LTNCDs Work

Although its name may sound complicated, LTNCDs are a simple concept. You’ll be able to easily estimate how much you’re going to earn through simple math.

But first, you have to look at your capital, the interest, interest period offered by the issuer, and the maturity of the LTNCD. 

For example, let’s take a look at the BPI LTNCD due 2025 (5 ½ years tenor).

It has a fixed interest rate of 4% per annum from and including the issue date (October 25, 2019). The interest will be paid quarterly, particularly on January 25, April 25, July 25, and October 25 of each year (except April 25, 2025 – maturity date). Transfers/negotiations must be done via PDEx.

For this Php3.1 billion-worth LTNCD, it will be issued in scripless form in P1 million denominations, and integral multiples of P100,000.   

Let’s say you put the minimum amount of P1 million in this LTNCD. Here’s how it will be computed:

Interest (quarterly):

  • Capital x (Interest / the number of payouts per year)
  • Therefore: 1,000,000 x (4% / 4) = 10,000

Total interest:

  • Quarterly interest x total number of payout
  • 10,000 x (4 payouts in 5 ½ years) = 220,000 

Gain:

  • 220,000 / 1,000,000 = 22%

From the calculations above, you will gain Php220,000 or 22% if you invested P1 million in the mentioned BPI LTNCD.


Time Deposits vs. LTNCDs

Now that you know what an LTNCD is, you may be wondering what makes it different from time deposits.

The maturity of time deposits ranges from a month to several years. During that time, it is non-transferable, and you need to pay a hefty fine to terminate it before maturity.

Meanwhile, LTNCDs cannot be pre-terminated but can be sold to the secondary market.


Pros & Cons of Investing in LTNCDs in the Philippines

Want to see whether or not LTNCDs are for you? Take a look at its advantages and disadvantages below.

Pros

High yield

Compared to time deposits, LTNCDs offer a higher annual interest rate, and it is assured if you keep it until it matures.

It is also safe since it is insured by the PDIC for up to P500,000 per depositor. 

Negotiable

This is perhaps one of the major draws of LTNCDs.

Because it can be sold to the secondary market before it matures, it gives higher liquidity than traditional time deposits. 

Possibility for passive income

If you put a hefty sum in your LTNCD, you can earn a steady cash flow quarterly. 

Tax exemption

Those who purchase an LTNCD in the primary market can enjoy tax exemption if they hold on to it for at least five years.

Easy requirements

Banks require investors to submit certain documents to purchase an LTNCD.

This usually includes their Tax Identification Number (TIN) to comply with the country’s anti-money laundering law, as well as other basic requirements.

Affordable

There are LTNCDs that have a minimum requirement of only Php50,000, with the option to add in increments of Php10,000 thereafter.

If you have extra money, consider putting it in an LTNCD instead of letting it sit in your regular savings  account.

Cons

It takes a long time to mature

If you want to reap the maximum benefits of LTNCDs, you need to keep them for at least five years.

While you may still sell it, it will be subject to charges, taxes, and fees.

You need to pay withholding tax

You never know what will happen in five years. Should you need the money in your LTNCD, you must sell it before it matures.

This will subject you to a 5% to 20% tax on any interest you earned.

Fixed interest

When it comes to LTNCDs, the interest is consistent throughout.

There is no incremental or tiered interest rate, unlike time deposits where you can enjoy higher interest depending on the maturity period. Therefore, there will be no opportunity for you to earn more.

Selling or buying from the secondary market isn’t easy

While LTNCDs can be sold to the secondary market, the process may take a long time. It will also require tons of paperwork. 

Limited offer period

If you wish to buy an LTNCD, you need to do it during the offer period. After this has lapsed, the only way you can buy one is through the secondary market.

Prepare to pay high charges and fees which can add up and greatly impact your gain. 


How to Invest in LTNCDs in the Philippines

The best way to invest in LTNCDs is to wait for banks to issue one. Make sure to purchase during their offer period.

Option 1: Banks

Banks usually post information about upcoming LTNCDs on their websites. 

Option 2: PDEx

You may also purchase LTNCDs in PDEx or the Philippine Dealing & Exchange Corporation

Upon purchasing an LTNCD, you will be given the Registry Confirmation as proof of ownership.

Another way you can prove ownership of an LTNCD is through the Registry Book kept by the Registrar of Philippine Depository and Trust Corporation, which is responsible for recording the owners of the LTNCDs released to the primary market, as well as subsequent ownership transfers. 


Banks that offer LTNCDs in the Philippines

Here are the different banks that offer LTNCDs in the country. 

1. Security Bank

Interest rate based on historical data: 4%
Interest Period: Quarterly
Minimum investment: Php50,000, and increments of Php10,000 thereafter
Tenor: 5 years and 6 months 

With their low minimum investment, Security Bank’s LTNCD is a must consider. Their offer is very accessible and is great for anyone who wants to diversify their portfolio. 

Security Bank offered their previous LTNCDs to extend term liabilities and expand their funding base, as well as to improve peso liquidity gaps and fund asset build-up. 

To get Security Bank’s latest investment updates, send a Securities Inquiry form here


2. BPI

Interest rate based on historical data: 3.75% (2017,) 4% (2019)
Interest Period: quarterly
Minimum investment: Php100,000, with increments of Php50,000 thereafter (2017), Php1 million with increments of Php100,000 thereafter (2019)
Tenor: 5 ½ years

To date, BPI has issued two LTNCDs – one in 2017 (due 2023) and the other in 2019 (due 2025). The two investment instruments greatly vary in minimum investment.

According to BPI, the purpose of their LTNCDs is to diversify its funding sources and support expansion plans.  

To get the latest updates on BPI LTNCDs, contact BPI Capital at (02) 8246-5166; (02) 8246-6154, or (02) 8246-5145.


3. Landbank

Interest rate based on historical data: 3.125% (2013), 3.75% (2015)
Interest Period: Quarterly
Minimum investment: P50,000
Tenor: 5 ½ years

Landbank has issued two LTNCDs – in 2013 (due 2019), and 2015 (due 2021).

To invest, you need to open a Peso account or designate an existing Landbank Peso account where your interest and principal securities payment will be credited. 


4. BDO

Interest rate based on historical data: 3.625% (2017), 4.375% (2018), 5.375% (2019), 4.00% (2019)
Interest Period: Quarterly
Minimum investment: Php100,000, with increments of Php50,000 thereafter 
Tenor: 5 ½ years

BDO has consistently offered LTNCDs to their customers since 2017 (due 2023).

As of press time, they have had four LTNCDs, with the latest one due in 2025. They also offered one in 2018 (due 2023), and 2019 (due 2024).

The purpose of their LTNCDs is to diversify the maturity profile of funding sources and support their expansion plans. 


5. Metrobank

Interest rate based on historical data: 3.875% (2017), 5.375% (2018) (other interest rates not available)
Interest Period: Quarterly
Minimum investment: Php50,000, with increments of Php10,000 thereafter
Tenor: 5 ½ years 

Although information on their LTNCDs is not listed on their website, Metrobank has offered multiple LTNCDs for their clients – two in 2014, and one each in 2016, 2017, and 2019.

The purpose of their LTNCDs includes beefing up their lending portfolio and financing their aggressive expansion program. 


LTNCD FAQs

Have other questions about LTNCDs? We’ll answer them below.

Is it risky to invest in LTNCDs?


It’s worth noting that all investments come with risk, and LTNCDs are no exemption. LTNCDs are only insured by the PDIC up to Php500,000 so if you invest more, there is risk involved.

If your risk appetite is extremely limited, only go with LTNCDs issued by established banks. 

How much is the minimum investment for LTNCDs?


This varies per bank. You can open an LTNCDs for as low as Php50,000 and add increments of Php10,000 thereafter.

However, there are also more lucrative LTNCDs that require a minimum of P1 million with the option to add in increments of Php100,000, particularly the previous LTNCD offered by BPI. 

Are LTNCDs insured?


Yes. It is insured up to Php500,000 by the PDIC. 

What are the requirements for investing in LTNCDs?


To invest in LTNCDs, you must be at least 18 years old. You must also have a Tax Identification Number. The requirements vary per bank, but they usually include the following: 

·  Application to Purchase Form
·  Client Suitability Assessment Form
·  Acknowledgment to Invest in Specific Instrument (when applicable)
·  Risk Disclosure Statement
·  Valid IDs
·  Client Agreement
·  Signature Cards
·  KYC Checklist
·  Order Ticket
·  Signed waiver
·  Data Privacy Form
·  Consularized proof of tax domicile (for aliens residing in the country, or non-residents engaged in the trade of business in the country)

How can you receive the interest from your LTNCD investment?


This varies depending on the bank you purchased your LTNCD from.

Usually, you need to open a savings account and the quarterly interest will be deposited there. You may also request for the interest to be paid to your account from another bank.

About MJ de Castro

MJ de Castro is the lead personal finance columnist at Grit PH.

MJ started her career as a writer for her local government’s City Information Office. Later on, she became a news anchor on PTV Davao del Norte.

Wanting to break free from the shackles of her 9-to-5 career to live by the beach, she pursued remote work. Over the years, she has developed a wide specialization on health, financial literacy, entrepreneurship, branding, and travel.

Now, she juggles writing professionally, her business centering on women’s menstrual health, and surfing.

Education: Ateneo de Davao University (AB Mass Communication)
Focus: Personal Finance, Personal Development, Entrepreneurship, & Marketing

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