BDO acquires largest rural bank

MANILA, Philippines - BDO Unibank Inc. (BDO), the country’s largest bank, has acquired One Network Bank Inc. (ONB), the largest rural bank, for a still undisclosed amount.

BDO president and chief executive officer Nestor V. Tan said the acquisition offers access to Mindanao and Visayas which are not yet fully penetrated by the universal bank of the SM Group.

 “It is more to take advantage of economic growth in the provincial areas. They are relatively under-served,” Tan said.

While he was unable to reveal that cost of acquisition, he admitted that the exercise is transitory and that ONB would not be immediately absorbed into the universal bank.

 “It will be a rural bank subsidiary in the meantime,” the BDO chief executive said.

ONB operates 105 branches and micro-banking offices mostly in the Mindanao region, but has likewise expanded in the Panay Island. It reported total assets of P28.1 billion,  net loans of P19.7 billion, and a deposit franchise amounting to P17.9 billion as of end September.

Reacting to the latest acquisition, Bangko Sentral ng Pilipinas (BSP) Gov. Amando Tetangco said that the acquisition could change the face of rural banking in the Philippines.

Tetangco said that it would improve the state of financial inclusion in the Philippines.

Meanwhile, ONB president and chief executive officer Alex V. Buenaventura said that the partnership is an ideal combination of the rural bank’s strong regional presence and BDO’s financial muscle.

“The combination would create new opportunities for growth. This partnership will enable ONB clients to access BDO’s strong balance sheet and expanded banking solutions, while providing BDO inroads to new market segments previously underserved by commercial banks,” Buenaventura said.

He further admitted that ONB has had a tradition of cooperation between BDO and the DMCI Group, owners of ONB.

“More than other banks, BDO has partnered with the group in several major long-term large scale investment projects,” he said.

Strategic fit always comes into play in investment decisions. ONB provides BDO with an instant platform to access almost 700,000 clients in areas where they mostly have no presence in. BDO, in turn, provides balance sheet strength, its strong business franchises, the largest capital base in the industry, and a wider menu of products and services for ONB clients.

Buenaventura said that with the potential entry of foreign banks and the need to attain scale in order to remain competitive, the move would be to team up with the biggest bank in the country.

The integration of the Asean markets, including the financial sector, makes it imperative that local banks strengthen their domestic positions.

Regional bank players have bigger and flexible coffers than major domestic players such as BDO, but a well-entrenched domestic player becomes a target for strategic partnerships with regional players, or a magnet for merger and acquisition (M&A) deals.

Buenaventura said that all ONB branches would be assessed individually. “Where applicable, some may be integrated or converted into BDO branches,” he revealed.

ONB’s existing management team would be retained pending further discussion. It was further noted that BDO has a history of absorbing most of the employees in previous acquisitions.

ONB is a product of the merger between three rural banks, namely the Consunji-owned Network Rural Bank, Buenaventura-led Rural Bank of Panabo, and Provident Rural Bank of Cotabato in 1996.

BDO is likewise a product of organic and inorganic growth, starting with the Acme Savings Bank in the late ’60s, which merged with Dao Heng Bank Philippines at the start of the 21st century. It was about this period that it acquired a universal banking license.

It acquired the banking businesses of First e-Bank and UOB Philippines, then bought Banco Santander Philippines.

In 2007, BDO merged with Equitable PCI Bank to form the country’s biggest bank. Along the way, it acquired GE Money Bank and Amex Savings Bank Philippines, Rural Bank of San Juan, the trust business of Deutsche Bank of the Philippines, and Citi Savings Bank.