BDO-Exportbank deal OK’d

BDO-Exportbank deal OK'd

BANCO DE Oro Unibank, Inc.'s (BDO) acquisition of the Export and Industry Bank, Inc. (Exportbank) has neared completion after the state deposit insurer green-lighted the transaction.

In separate disclosures to the stock exchange yesterday, BDO and Exportbank said the Philippine Deposit Insurance Corp. (PDIC) has approved BDO's purchase of the smaller bank's assets and liabilities, including deposits.

BDO, the country's largest bank by assets, in its disclosure however added "the transaction is still subject to the execution of definitive agreements and documentation acceptable to the parties and PDIC and the fulfillment of certain closing conditions, which include the final approval of the Monetary Board."

Once the transaction is completed, BDO will add Exportbank's 50 branches, 35 of which are in Metro Manila, to its 726.

The big banks have been disallowed to put up more branches in Metro Manila by the central bank in a bid to encourage them to expand to the less-served areas.

The Monetary Board, the policy-setting body of the Bangko Sentral ng Pilipinas approved in principle the BDO-Exportbank merger on July 16, 2010. Exportbank's stockholders approved the deal during the special stockholders' meeting called on Sept. 20, 2010.

BDO President Nestor V. Tan in a text message to BusinessWorld yesterday said, "[BDO] got the letter of approval from PDIC late Tuesday."

"While the broad terms have been approved, details of the transaction still need to be defined and agreed upon," he added.

He said BDO will assume Exportbank's P18.5 billion worth of deposit liabilities.

Exportbank also borrowed a total of P9 billion from the PDIC. The state deposit insurer extended P7 billion in income support and P2 billion in subordinated debt -- all released on Oct. 20, 2006 to Exportbank -- to prop up the bank, which was sinking due to non-performing assets and losses.

Exportbank's report as of the third quarter of 2010 showed P30.5 billion in assets and P28.7 billion in total liabilities.

Luis S. Reyes, Jr., BDO investor relations and corporate planning head, in a phone interview said the liabilities to be assumed by BDO "could still change and would be determined and finalized on the closing date."

Asked when the transaction would be finalized, Mr. Reyes said, "It could be a couple months down the road. It could be one, two or three months."

For his part, Exportbank President Juan Victor S. Tanjuatco in a statement said, "The transaction with BDO brings to full circle the efforts we started five years ago. We infused capital and initiated reforms all geared at improving the bank's financial condition and making it attractive to investors."

"Our transaction with BDO is the best for all Exportbank stakeholders.

It brings the bank to safe harbor. The resulting synergies from BDO's large scale operations will enhance the position of our depositors, representing about 80,000 deposit accounts," he added.

Exportbank had been in search of buyers since 2007 due to heavy losses. As of end-September, it had posted P535.93 million in net loss, down from a P606.04-million loss in the same period a year ago.

Exportbank, in its disclosure also said PDIC has approved the sale of EIB Savings Bank, Inc., Exportbank's thrift subsidiary, to its corporate buyers.

Exportbank, in its 2009 annual report, said it has sold EIB Savings Bank, located in Talisay City in Cebu, to Project Quest Corp., Fleetwood Holdings Corp., Navion Capital Resources Corp., and Santos Gonzalez Hijos, Inc. for P71 million.

BDO, controlled by the Sy family, has expanded through the years by acquiring other banks.

It first bought the Dao Heng Bank's subsidiary in the Philippines in 2001, followed by the First e-Bank in 2002. The following year, BDO swallowed Banco Santander Central Hispano's subsidiary in the Philippines.

In 2005, it acquired the United Overseas Bank. Next was Equitable PCI Bank in 2006. The year after, it bought American Express Savings Bank and two years later, GE Money Bank.

Its assets summed up to P1.01 trillion as of December, besting second-ranked Metropolitan Bank & Trust Co. and third-ranked Bank of the Philippine Islands, whose assets reached P885 billion and P867 billion respectively.

As of end-2010 BDO posted a net income of P8.8 billion, 46% higher than in 2009.

BDO shares closed at P52.30 apiece yesterday, 65 centavos higher than the previous day. -- Ann Rozainne R. Gregorio

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