PBCom sale still in limbo after 6 years

MANILA, Philippines - After forging an agreement six years and three months ago, the mandated sale of the Philippine Bank of Communications (PBCom) is turning into a game of patience, maneuvering and deep pockets.

The sale of the bank’s majority stake is mandated under a financial assistance agreement (FAA) signed in March 2004 between the major stakeholders of the bank and state insurer Philippine Deposit Insurance Corp. (PDIC).

The FAA extended a P7.6-billion financial assistance to PBCom due to huge losses. In turn, PDIC took four board seats in the bank to protect the government’s interest.

It was likewise agreed that the majority stakeholders would sell their holdings to a third party within five years from signing the FAA or by March 2009. Last year, the deadline was extended indefinitely or until a sale to a third party have been consummated.

“It will not result in a loss to government if the bank is not sold within the year as the P7.6-billion assistance is backed by government securities. The financial assistance had a 10-year maturity period,” Jose C. Nograles, president and chief executive officer of PDIC, said in a press briefing yesterday.

However, Nograles expressed concern the troubled commercial bank may continue to encounter problems while failing to fulfill the provisions in the FAA.

“Our mandate is to protect the bank’s depositors. Thus our concern is to preempt any bank failures,” he said.

The Bangko Sentral ng Pilipinas (BSP) is mandated to supervise the banking sector while the state insurer looks after the interest of the banking public.

In 2008, the Macquarie Group was tapped as financial advisor for the sale of the 67-percent stake controlled by the majority stakeholders of PBCom. They are collectively known as the Nubla, Luy and Chung families.

Unconfirmed reports indicate that there are two domestic financial institutions interested in PBCom and have, in fact, conducted due diligence with the help of the Macquarie Group.

PBCom reported a net income of P36 million in the first three months of 2010, or roughly 200 percent higher than the P12 million earnings in the same period in 2009. Net earnings in 2009 amounted to P102.193 million.

In its 2009 report to the Philippine Stock Exchange (PSE), PBCom said “the lower loan volumes, thinner net interest margins and lower revenue streams from other income sources resulted to a 67.8 percent drop in bottom line profits vis-à-vis 2008 net income of P312.4 million.” It has not declared a stock or cash dividend since 2006.

An official of one of the interested institutions, however, lamented that the sale is being hampered by the “uncooperative” stakeholders.

“They are asking for premiums not based on the real value of the bank,” said the bank official, who asked not to be named. “The longer they hold out, the bank will be less attractive to the market.”