Ty, Sy, and Tan play bankers game well

The tumultuous battle for control among shareholders of Equitable PCI Bank has apparently come to an end after the Go family gave up control of the country’s third largest bank in favor of Banco de Oro, one of two banks owned by retail tycoon Henry Sy.

It was a story of a David gobbling up a Goliath considering that BdO, while being one of the most profitable and fastest growing Philippine banks, is just ranked 8th in terms of asset size.

Still, it was a tale that is not new for the Go family, whose Equitable Bank acquired the much larger PCI Bank six years ago through the financial assistance of state pension funds, and purportedly upon the instructions of president-turned-detainee Joseph Estrada.

With the sale of its 25-percent equity in EPCIB, the Go family now bids goodbye to more than 50 years of banking history, but whether it was indeed a farewell filled with sorrow only the Go’s would know.

One thing is clear though. The country’s two biggest pension funds, SSS and GSIS – which helped the Go’s Equitable Bank to become the country’s third biggest bank – are now left holding a bag of bad investments.

While EPCIB has reported commendable earnings in the previous quarters, its share price had sharply fallen to a little less than P55 apiece, nearly half of the original purchase price of SSS and GSIS of P96.76 per share. Thus, their combined original investment of P16 billion is now valued at roughly only P9.1 billion.

With the Go family out and the Sy in, the question now is whether SSS and GSIS should hold on to their shares and wait for an improvement in value or cash in now and absorb the loss. Of course, if you ask Sy, he would prefer to get these shares now at the lower price level and possibly pave the way for a merger between BdO, EPCIB, and Chinabank – another Henry Sy Bank – to create the country’s largest bank, grabbing the title that is now being enjoyed by Metrobank of the Ty family.

PNB: Within Lucio Tan’s Grasp

The much-awaited bidding for 67 percent of the Philippine National Bank ended with just two bidders, the Union Bank-Avenue Capital consortium and the Lucio Tan Group. None of the other foreign and local firms expected by the government showed up.

Apart from the non-appearance of other bidders, Finance Secretary Gary Teves was also quite disappointed by the lower-than-expected bid price of Union Bank-led consortium of P43.77 per share, merely 77 centavos above the set minimum price of P43 a share. Incidentally, the Tan Group submitted a bid price equal only to the minimum price of P43 per share.

Since the Tan group has the option to match the offer of Union Bank under existing arrangements with PNB, some are speculating and asking the question whether there is a deal between Union Bank and the Tan Group.

They see the bid price difference as too small and will enable Lucio Tan to acquire the 67 percent of PNB at a bargain price. Of course, at the expense of the tax payers as the expectations of the government, as expressed by Sec. Teves, was not achieved.

With almost complete control of PNB, Lucio Tan can now make the move to merge PNB and Allied Bank. With such merger, he will land in the fourth spot of the biggest banks in the Philipines behind Ty and Sy.

One has to be a wily player in this game of acquisition, consolidation, and mergers to move ahead.

Bigger Is Better

The Philippine banking sector is seeing another wave of mergers and acquisitions, and most banks are heeding the call that bigger is better, stronger, and more profitable.

We’ve always heard about how urgent Philippine banks need to beef up capital, improve their performance, clean up their portfolios, etc. to compete with the foreign banks whose growth in the country has been exponential.

Given the Philippines’ size, the country has frequently been criticized as too "overbanked" and "overbranched," such that any further consolidation of the industry, one that would guarantee that only the biggest and the soundest are left, is certainly most welcome.

Once the dust settles down after the frenzied activities of mergers, consolidations and acquisitions, one need not be surprised if Chinese-sounding families eventually wind up dominating the Philippine banking sector – Sy of the BdO-EPCIB-China Bank, Ty of the Metrobank group, and Lucio Tan of PNB and Allied Bank.

Well, since they have the resources and know how to play the game, there must be nothing wrong with that. Or is there?

Service Above Self Without Boundaries

Rotary is not just "service above self," it is also "service without boundaries." Today, there are 1.2 million Rotarians belonging to some 31,000 Rotary clubs in 166 countries.

In 1985, Rotary made a historic commitment to immunize all of the world’s children against polio. Through its PolioPlus program, Rotary became the largest private-sector contributor to the global polio eradication campaign with 2005 as the target date for a polio-free world. Indeed, Rotary now is "service above self without boundaries."

What are the challenges facing Rotarians today as they pursue their mission of service to others? How is Rotary meeting these challenges organizationally and in terms of use and allocation of resources? With the apparent worldwide success of PolioPlus program, what is the next Rotary commitment?

Join us in "BREAKING BARRIERS" on Wednesday, 24th August 2005, IBC-TV13 (11 p.m.) and gain insights into the views of William "Bill" Boyd, incoming President of Rotary International, on issues and programs related to Rotary clubs‚ involvement in community service locally and worldwide. Watch it.

Non-Wager Poker Tournament

The Poker Club of the Philippines is reminding poker enthusiasts that registration is still open for the 3rd leg of the Poker King Challenge, a series of non-wager poker tournaments conducted under the auspices of PAGCOR, the country’s gaming authority.

The leg competition is scheduled on the 27th of August, to be held at Casino Filipino Angeles, with registration starting at 8 a.m. You may visit www.PokerClubofthePhilippines.com for details.

The Club also has good news for poker enthusiasts in the South. The 4th leg of the Poker King Challenge is scheduled to be held at the Waterfront Airport Hotel, Cebu City on 24th and 25th of September 2005. Being the only leg competition scheduled in the area, bigger prizes are at stake in addition to qualifying slots for the Grand Finals scheduled by the end of the year.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected] or at [email protected]. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz.