PNB, Allied merger nearing completion
June 1, 2011, 1:23am
MANILA, Philippines — Philippine National Bank (PNB) and Allied Banking Corp., both controlled by tycoon Lucio Tan, expect to finalize the merger this year following months of close negotiations with US regulators on the disposition of Allied Bank's 28 percent equity in California-based Oceanic Bank.
PNB President Eugene Acevedo is confident that talks with US regulators will yield definitive results in the next months. "We've been talking (with US regulators) in the last 4-5 months and we have had constructive discussions with them (on) what is acceptable. We're hoping to get the show on the road by the end of this year," he said.
The bank is set to spend up to P1.5 billion to fund the merger and once it is completed, the bank expects to save P1 billion from the combined business and services. The PNB-Allied Bank merger had a breakthrough two years ago when an investor expressed an interest to buy the Oceanic Bank shares however negotiations fell through and PNB had to restart talks with the US government on the disposition of equity.
With the merger in sight, Acevedo said PNB will have to focus more on the challenge of operating a bigger bank in terms of resources and assets, and profitablity will be affected. "We will be spending more money when we merge (so) profits will not be as important this year," he told reporters. "It will take two years before we start recognizing gains from the merger (but) this will allow us more than 10 percent savings or P1 billion."
PNB is fifth largest bank in asset size while Allied Bank is 14th biggest of 38 commercial banks. The merger will make PNB the fourth biggest, displacing state-owned Land Bank of the Philippines.
For 2011, Acevedo said they could do better than a five percent increase in net income. "We aim to beat 2010 but we'd rather not say how we will beat it. Our challenge is to build core businesses (and) we want to be less dependent on one-offs. We also have assets to sell and that still is part of our (profits bottomline)." The bank has real and other properties acquired or ROPA of P5 billion for sale this year. "Aside from our significant ROPA sales, we are increasing the amount of predictable income stream," he added.
He also expects corporate loans to grow by 20 percent this year. "We want to diversify this portfolio, we'd like more SME (small and medium enterprises) and consumer loans."
PNB is issuing P5.5 billion of 10-year unsecured subordinated debt as lower Tier 2 this month to pay for maturing loans also worth P5.5 billion in August.
Head of Treasury and Executive Vice President Horatio Cerbero III said they plan to issue the second tranche of P4.5 billion by the end of the year, mainly to fund their expansion program. He said the next issue "is not urgent" and will depend on demand and market sentiments. At the end of 2010, PNB has a capital adequacy ratio of 19.2 percent, better than industry average of 16 percent.
As of the end of the first quarter, the bank registered a decline in net income of 64 percent to P319.78 million due to trading losses. Last year PNB's net income increased by 61 percent to a record P3.54 billion, from P2.2 billion in 2009, mainly from treasury income.
PNB operates more than 325 branches and is set to open 20 more this year. Of its 3.1 milion deposit accounts, 1.3 million are oversead Filipinos and their beneficiaries. (JAL)
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