MANILA, Philippines - Union Bank of the Philippines, the main banking unit of the Aboitiz clan, is investing additional equity in City Savings Bank Inc., the commercial bank said in a disclosure to the Philippine Stock Exchange.
UnionBank said its board has approved the purchase of 62,976 unissued common shares, of City Savings at P15,879.15 per share for a total purchase price of P1 billion.
The bank said the infusion of additional equity in the thrift bank would support City Savings’ geographic expansion plan to reach and serve the wider Luzon customer base.
In turn, Unionbank said the purchase of more shares of City Savings would help in strengthening its network.
“The additional equity investment shall complement UnionBank’s business operations,†it said.
The purchase, however, is still subject to the approval of the Monetary Board.
UnionBank early last year purchased City Savings for P5.7 billion.
Based on the expansion plan, UnionBank would add more City Savings branches to the existing 28 to 30 branches to 40.
Justo Ortiz, UnionBank chairman and chief executive officer, said they plan to grow the branches of City Savings to about the same level as UnionBank which currently has 200 branches nationwide.
He said they would probably keep City Savings as a separate subsidiary rather than merging its branches with UnionBank.
Ortiz pointed out that City Savings has its own niche market which is currently not being served by Union Bank.
“We are interested in City Savings because this is consistent with our focus and our 2020 goals what we set out to do…to become a retail bank as our historical roots we are in the business of lending to corporate clients,†he said.
He said the acquisition of City Savings would allow UnionBank to develop a retail base which usually are not being served by a universal bank.
“Its a profitable business and potential for growth particularly in Luzon, they can leverage on our operating platform and on our technology. Clearly a different market and a different brand, most probably be kept at a separate stand-alone subsidiary because the market is very specific, the behavior of the market is also different from our market,†he said.
As a thrift bank, City Savings is primarily engaged in offering loans to school teachers under the Department of Education’s Automatic Payroll Deduction System.
Aboitiz Equity Ventures owns 44.82 percent of UnionBank’s total issued and outstanding capital stock and would have a resulting beneficial or attributable interest of 44.61 percent in City Savings’ equity after UnionBank’s acquisition.