By: Doris C. Dumlao
Philippine Daily Inquirer
Wednesday, March 7th, 2012
Philippine National Bank and Allied Bank expect to complete their full
integration within the next 18 months, creating the country's
fourth-largest private bank and generating more than P1 billion in
yearly cost savings for the banking unit of tycoon Lucio Tan.
Shareholders of both PNB and Allied Bank on Tuesday approved the revised
terms of the merger via a share-for-share swap transaction, a union
where PNB will be the surviving entity.
In a joint PNB-Allied Bank briefing, PNB chairperson Florencia Tarriela
said that for PNB, 2011 was better than the previous year, with the bank
growing its profit by about 20 percent year on year.
"It should be a much better this year (2012)," Tarriela said, even while
the bank had to work hard on its integration with Allied Bank.
"It's like building a house. There are some things you need to work on,"
she said.
The two banks assured their respective stockholders that the synergies
arising from the broadened network, diversified deposit base and
improved scale would benefit shareholders.
After obtaining approval for the revised merger terms, PNB president
Carlos Pedrosa told shareholders that PNB-Allied Bank would next work on
getting the approval from the regulators—the Bangko Sentral ng
Pilipinas, Securities and Exchange Commission, Philippine Stock
Exchange, Bureau of Internal Revenue and Philippine Deposit Insurance
Corp. The effectivity of the merger would be the first day of the month
following the approval by the SEC, he said.
The combined entity will have a distribution network of 646 branches
nationwide and total assets of P514 billion, the fifth-largest among
local banks (including Land Bank) and the fourth among privately owned
lenders. It will also have the largest international footprint across
the Asia-Pacific region, Europe, the Middle East and North America. PNB
also aims to regain leadership in the remittance business, Pedrosa said.
Allied Bank president Anthony Chua, who heads the integration of the two
banks, said full integration would likely happen in 18 months.
PNB senior executive vice president Carmen Huang said the group was
expecting to save some 8-10 percent of the combined expenses of the
bank, translating to more than P1 billion per year, once full
integration is achieved.
In a report to shareholders, PNB said savings would be generated from
"branch re-engineering, economies of scale, consolidation of overlapping
systems and corporate indirect overheads, realignment of front offices
and optimization of back office processing and support functions."
The target is to reduce the cost-to-income ratio to at least 50 percent
from the 61 percent ratio at present, Huang said.
Chua said the combined entity would likely end with a manpower of 7,000
to 8,000. At present, PNB has around 5,200 employees while Allied Bank
has 3,800.
Part of the manpower reduction will be covered by natural attrition,
Chua said, noting that in both banks' hiring program, they had already
considered the forthcoming merger.
Pedrosa also said the merger would be done in a way that would have
"minimal impact on employees."
In terms of business mix, the union will beef up the group's lending
portfolio for small and medium enterprises (SMEs), Chua said. At
present, about 40 percent of PNB's lending portfolio is devoted to
top-tier corporations, 20 percent to the government sector and the
remainder to consumers and SMEs.
All the issued and outstanding common shares of Allied Bank will be
converted to common shares of PNB at a ratio of 130 PNB common shares
for each issued Allied Bank common share. All the issued and outstanding
preferred stock of Allied Bank will also be converted to PNB common
shares at a ratio of 22.763 PNB common shares for each issued Allied
Bank preferred share.
To be able to do this, PNB shareholders approved the reclassification of
its 195.17 million authorized preferred shares into common shares
thereby increasing its authorized common stock to 1.25 billion.
Thereupon, the bank will issue 423.96 million new PNB common shares out
of its authorized and unissued capital stock to be valued at P70 per
share to swap for the outstanding Allied Bank common shares and
preferred shares.
ING acted as financial adviser to the majority shareholders of PNB and
Allied Bank for this merger.
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