Banco de Oro pursues acquisition of Export and Industry Bank

Banco de Oro Universal Bank (BDO) is pursuing its bid to acquire medium-sized Export and Industry Bank (EIB) as the Henry Sy-led bank continues its bid to break into the top three in the country’s commercial banking system.

There were reports that officials of the Bangko Sentral ng Pilipinas (BSP), the Philippine Deposit Insurance Corp. (PDIC) and representatives of the two banks held a meeting Thursday afternoon at the BSP to thresh out the mechanics of the acquisition plan by BDO.

BDO reportedly wants to acquire EIB and in the process avail of financial assistance from regulators since EIB is still burdened by huge amounts for repayment to two of its largest depositors, San Miguel Corp. and the Manila Electric Co. (Meralco), as a result of its take-over of the former Urban Bank.

Under its six-year Liabilities Servicing Plan (LSP), EIB must repay all the bank’s depositors, creditors, and stakeholders to complete its rehabilitation.

Petron Corp., the third of the big repayment accounts, has already availed of an advanced full payment, which has put pressure on EIB’s earnings.

The PDIC extended a P1.5-billion standby facility and a P200-million special loan facility to EIB for its role as the ‘white knight’ that acquired Urban Bank. Unconfirmed reports indicate that the special loan had already been tapped but the standby facility had only partially been utilized.

BDO reportedly wants to make use of the facility and whatever incentives it could squeeze from the regulators under BSP Circular 237, or the governing regulations regarding mergers and acquisitions (M&As) and incentive and privilege schemes.

PDIC president and chief executive officer Ric Tan said everything is still under negotiations but neither confirmed nor denied that BDO is involved.

In a brief interview, BSP Governor Rafael B. Buenaventura confirmed the meeting but could not give details.

In a disclosure to the Philippine Stock Exchange (PSE), BDO admitted holding discussions with "several banks or different shareholder group of banks to explore opportunities of working together."

The latter part of the disclosure boosted speculations that the Lippo Group of Singapore would remain a key player in the surviving bank. The Lippo group controls 30 percent of EIB’s total equity and bank sources said they are prepared to increase their stake.

The sources also indicated that Metropolitan Bank and Trust Co. (Metrobank) was also an "interested buyer" but BDO "was miles ahead, forcing them (Metrobank) to back out." "It is safe to say that they tried to block BDO’s assault on EIB knowing the strategic or expansion motives of the Sy commercial bank."

BDO is reportedly attracted to the nearly 50 branches of EIB as well as the presence of huge accounts like San Miguel and Meralco. EIB also has huge property stakes in Makati and other prime areas in Metro Manila.

But EIBs’ liquidity problems continue as it still has to complete its payments with the two big accounts. The original P15.8-billion repayment plan, part of the six-year rehabilitation plan, reportedly stood at half the amount.

EIB reported a net income of P20 million last year from P120 million the previous year. Total assets stood at nearly P30 billion, almost the same as the year before.