Merger of BPI, PNB might trigger more consolidations

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. 

Refer http://www.manilatimes.net/index.php/business/top-business-news/35838-merger-of-bpi-pnb-might-trigger-more-consolidations

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Merger of BPI, PNB might trigger more consolidations


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