BPI, PNB-Allied in merger talks Union seen to create country’s biggest bank

MANILA, Philippines - The Ayala-controlled Bank of the Philippine Islands (BPI) and Lucio Tan’s Philippine National Bank (PNB) have entered into negotiations for a possible merger that would create the country’s biggest lender.

In separate statements sent to the Philippine Stock Exchange (PSE), BPI and PNB confirmed discussions between the Ayala Group and the Lucio Tan Group, but added that appropriate disclosures will be made pending necessary board and regulatory approvals.

As a result, both banks requested yesterday a temporary trading suspension on their stocks.

But with investors training their sights on other banking stocks, the local equities market surged to a fresh all-time high as the proposed merger is seen to spur more bank consolidations.

PNB and another Tan-owned bank, Allied Banking Corp., are in fact in the final stages on their merger, with PNB as the surviving entity.

PNB, meanwhile, informed the PSE that it has secured approval from the Hong Kong Monetary Authority to become a majority shareholder of Allied (Hong Kong) Ltd. in relation wit the proposed PNB-Allied merger.

“We are still waiting for the written approval of the Financial Services Authority (FSA) on the same for our United Kingdom operations as well as the approval of the Philippine Securities and Exchange Commission (SEC),” PNB corporate secretary Doris Te said.

Banking sources said PNB is offering a share swap deal with BPI instead of an outright buyout. Under this proposal, PNB will own 20 percent of the merged bank, BPI with 33 percent stake, and 10 percent for DBS, Ayala’s Singaporean partner in BPI.

“The LT Group would become the second biggest shareholder of the merged bank,” the sources pointed out.

According to the same sources, Tan’s group is eyeing a share price ranging from P95 to P96 per share or 1.8x the book value of PNB at P56.

The combined assets of BPI, PNB and Allied Bank would amount to P1.2 trillion, catapulting it to the top of the local banking industry. BDO Unibank Inc. of the SM Group, currently the nation’s largest lender, has total resources worth P1.15 trillion.

However, BDO said it is not in any way threatened by the possible merger, a top bank official said.

Teresita Sy-Coson, BDO chairperson, in an interview on the sidelines of the ING-Finex CFO of the Year Award, said they welcome this kind of development in the banking industry.

“I think it’s good. I think the three-way merger is good for the industry,” she said.

“We never meant to be number one. It just happened, of course. Sometimes, it’s us and sometimes it’s someone else,” Sy said.