3 more bank mergers seen

The Bangko Sentral ng Pilipinas (BSP) said it expects up to three more bank mergers until next year as the banking landscape shifts dramatically following the merger of Equitable PCI Bank and Banco de Oro.

BSP Governor Amando M. Tetangco Jr. told reporters that for reasons of size, competition and strategic footing, authorities were expect two to three more bank mergers to immediately follow.

"Naturally, they want to be more competitive in the market," Tetangco said. "Aside from what already happened, I wouldn’t be surprised if two to three more banks merged up to next year."

Driven by the growing sophistication of the financial market as well as the large investment outlays required to adapt new technologies, bank regulators said it seems unlikely that the consolidation trend is drawing to a close.

BSP Deputy Governor Nestor Espenilla Jr. told reporters earlier that the banking industry in general is moving in the right direction and consolidation is only part of the process.

"The industry is at that point where if they want to continue playing, they need to make what are sometimes large investments," Espenilla said. "If they do not have the critical mass, the investments required in technological requirements alone could be prohibitive."

Espenilla said that banks that do not have this critical mass have the option of either merging with other banks or scaling down to play in specific niche markets.

Even the movements among the country’s largest banks, according to Espenilla, could not be conclusively considered as completed since the upheaval in the global financial market is also far from over.

The merger between Equitable and BDO, for instance, placed BDO as the surviving entity squarely in second place among the country’s biggest banks.

Espenilla said the growing sophistication of the banking industry and the technologies being developed to cope with this growth often required considerable investments.

However, Espenilla admitted that the Philippine market is not big enough to support large consolidations and even from a geographic standpoint, there would be niches that only certain banks would be able to serve.

"We know for a fact that big banks do not serve smaller customers and small customers are often turned off by big banks," Espenilla said. "This means there will continue to be niches in this type of market."