The Bangko Sentral ng Pilipinas (BSP) approved the acquisition two weeks ago where Citibank would buy Insular Savings Bank (ISB) from Insular Life, the country’s oldest and biggest insurance group.
According to banking sources, Citibank indicated plans of absorbing ISB’s employees that they have qualified although discussions on the specific terms of the acquisition are still on-going.
Citibank and Insular Life have already signed an exclusivity agreement that banking sources said would last six months.
The value of the transaction was not previously disclosed but ISB is worth at least P860 million so Citibank was expected to spend at least this much. At P1 billion, Insular Life would be making a tidy profit.
According to sources who declined to be named, Citibank has applied for a number of merger incentives before the Monetary Board of the BSP especially on the relocation of branches and similar bank-branching perks.
Sources said there was no actual deadline for concluding the on-going negotiations but there was a critical target date by which all major points should have been resolved.
"March 15 will be a critical target date," according to sources.
Citibank has been scouting for a local bank to acquire for the last two to three years to expand its branch network in the country. It has been rumored to be negotiating to buy a thrift bank last year but the deal did not prosper.
BSP Governor Rafael B. Buenaventura earlier hailed the acquisition as a vote of confidence, adding that the BSP’s moratorium on bank-branching has been effective in compelling banks to consolidate.
"At the very least, it gives an opportunity for those who want to exit to find buyers," Buenaventura said.
Despite the liberalization in the entry of foreign banks into the country, even pioneer banks like Citibank are allowed to open only six more branches on top of existing ones.
Citibank is following the track of British bank HSBC Ltd., which acquired PCI Savings Bank from Equitable PCI Bank in 2000 to widen its network.
According to sources earlier, Citibank was drawn to ISB by its good balance sheet, diversified consumer portfolio, strategic branch locations and wide array of banking licenses.
ISB has 36 branches nationwide–26 in Metro Manila and 10 in key provincial cities like Cebu, Davao and Cagayan de Oro.
Aside from its basic thrift bank license, Insular Savings also has trust banking, foreign currency deposit unit, quasi-banking and government securities dealer licenses.