Merger of BPI, PNB might trigger more consolidations
Published on 23 November 2012 Hits: 120 Written by Madelaine B. Miraflor
Reporter
The merger between the Philippine National Bank (PNB) and Bank of the
Philippine Islands (BPI) may trigger consolidations among banks to
maintain leadership in the industry.
On Wednesday, the board of directors of BPI, PNB and Allied Bank
approved a three-way merger, that will bring together about $33 billion
worth of combined assets for the surviving entity, which is BPI.
The merger of PNB and Allied was earlier approved by the Bangko Sentral
Ng Pilipinas and the Securities and Exchange Commission.
At the sidelines of the Economic Journalist Association of the
Philippines forum on Private-Public Partnership, April Tan, research
head of Col Financial Philippines, told reporters that a merger between
PNB and BPI may prompt major consolidations, citing the 1990
Equitable-PCI bank merger that left Metrobank no choice but to acquire
different banks to maintain its number one position.
"We don't know if it will trigger [any impact in the banking industry]
but as we recall in the 1990s, when Equitable merged with PCI Bank, what
happened was Metrobank bought all these banks afterwards to maintain its
number one position," she said, referring to Metropolitan Bank and Trust
Co. of the Ty family.
She also said that once the PNB and BPI merger is finalized, BPI will
emerge as the number one bank in the Philippines, displacing current
leader Banco de Oro Unibank Inc. of Henry Sy.
"Both [banks] will benefit [in the transaction]. BPI, in terms of size,
will become number one. We are assuming that PNB and Allied Bank will
continue with the merger, and after that will merge with BPI. They will
become number one," Tan said.
"On the valuation, they might do a share swap. They might not pay cash.
Mahal naman shares nila [BPI has expensive shares] so when they do share
swap, potential dilution may not be as bad," she added.
Tan noted that BPI has a track record of successfully acquiring
companies and creating synergies, and this might actually help PNB and
Allied realize their own synergies.
"One of the reasons people were no longer excited with PNB-Allied merger
is because there was this huge question mark on execution. If you look
at the ROE [return on equity] of the two banks on a standalone basis, it
is below industry average," she said.
"There are synergies but the question is if they [PNB and Allied] can
execute," Tan added.
Also on Wednesday, news about the discussion between Ayala Group and
business tycoon Lucio Tan regarding a share swap, which is expected to
pave the way for the consolidation of BPI and PNB, spread like wildfire
within the industry.
Earlier reports said that Tan would give up his controlling stake in PNB
for shares in BPI under the share swap.
Previous reports also said that the Ayala Group would remain in control
of the much larger BPI, while Tan would get 20 percent.
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