Fresh from its acquisition of Far East Bank and Trust Co., the Bank of Philippine Islands (BPI) will propose to its stockholders a 68-percent increase in the authorized capital to P29.6 billion, from P17.6 billion when they meet Monday, May 15, a high-ranking official of the bank told The STAR.
The officials ,who asked not to be named, refused to disclose how the additional capital would be spent. He said BPI has been raising its capital every two years and it would be used to partly finance its 25-percent stock dividends that would also be proposed to the shareholders during the meeting.
"We are required to fund the stock dividends with either cash or shares," he explained. In a stock dividend, a company issues additional shares to its stockholders resulting in the reduction in its par value. To avoid the dilution of the par value, BPI would be expanding its capital to finance the new shares.
But analysts said the bank is gearing up for expansion in the future.
"It's a preemptive move," an analyst from a foreign investment bank said. "the bank just wants to be prepared for any developments in the industry."
"In a tightly competitive environment, it always pays to be liquid," another analysts said.
Apart from the expansion plans, they said the bank is gearing up for higher lending and investments in the near term with the projected economic recovery.
But the BPI official said the bank does not need to raise capital just to increase its loan portfolio since it can use its deposit liabilities for investment and lending.
They said BPI has always been on the lookout for banks and other financial institutions to acquire that would complement its operation and strengthen its foothold in the industry.
In October last year, BPI acquired Far East Bank. The merger created the country's largest bank with total assets of P352 billion.
The merger was the sixth for BPI and the biggest in the country's banking history. In 1974, it acquired People's Bank and Trust Co. It was followed by the buy-in of Commercial Bank and Trust Co. in 1981; Ayala Investment and Development Corp. in 1982; Family Bank and Trust Co. in 1984; and, City Trust Banking Corp. in 1986.
"BPI's mettle in deriving cost savings and greater market share from mergers has been proven over the years, that is why it ranks first in almost all markets," analysts said.