The Cocobank deal

To qualify for those senior citizen discounts, one must swear (under oath, of course) that he/she earns a maximum of P60,000 a year. That’s P5,000 a month – a salary that is higher than what senior citizen cardholders who live in Forbes Park pay their drivers.

Theoretically, monthly income covers everything from the pension paid by either the Social Security System or the Government Service Insurance System to earnings from money market placements and other investments.

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Bank notes: That Philippine Deposit Insurance Corp. is extending P20 billion to recapitalize United Coconut Planters Bank is not the same thing as saying the bank is in financial trouble.

When a bank is experiencing a short-term financial trouble, the Bangko Sentral steps in with an emergency loan. When a bank is experiencing a long-term financial problem – in this case, recapitalization – the PDIC steps in.

Cocobank has not been able to increase its capital since 1986 because of the unresolved issue of its ownership. As a result, the bank has become less competitive.

Here’s the deal being worked out by PDIC president Ricardo Tan and Presidential Commission on Good Government chairman Haydee Yorac. Of course, Ric Tan’s chairman, Finance Secretary Jose Isidro Camacho, is also involved in the talk.

The deal signing will be taking place within a few days.

• PDIC will purchase P13 billion worth of Cocobank assets. This will free up loan loss provisioning, which will be reverted to capital . Broken down, P8 billion will be outright purchase of non-performing (assets – what the banking industry calls ampao, after a red-colored Chinese sweet that is all air inside. The balance P7 billion will be secured assets which the bank can repurchase within a 10-year period.

• PDIC will extend P7 billion in loans. These loans can qualify as subordinated loans or tier-2 capital. Because of the one-is-to-one matching provision, only P2 billion will immediately qualify as tier 2 capital, the same amount of the bank’s tier-1 capital.

When the deal is signed, PDIC becomes a major creditor of Cocobank (regardless of whether Mr. Tan gets the money from Bangko Sentral Governor Rafael Buenaventura or not).

To protect its interest, PDIC has nominated two bankers to Cocobank’s 15-man board, to replace two vacancies (one of which was held by now Finance Undersecretary Lorna Pulido-Tan) These are former PDIC president Norberto Nazareno and recently resigned Bank of America regional head for corporate banking Jose Querubin.

Both Boy Nazareno and Jojo Querubin worked with Citibank during the 1980s.

It was during Mr. Nazareno’s watch at PDIC that the rehabilitation plan for the Philippine National Bank was put together. There has been talk that Mr. Nazareno will join Cocobank as chairman and chief executive officer but his name has been taken out of the short list given to Malacañang. You see, Mr. Nazareno has recently undergone another angioplasty and can no longer take the killer pace required of the CEO of a bank undergoing rehabilitation.

Mr. Querubin, the best buddy of Lito Camacho during his De La Salle University days, (that was before he decided to go to Wharton and Mr. Camacho decided on Harvard) came into the picture when B of A eleminated his job (with the generous retirement package) as part of the downsizing program.