Capital hike prompts further M&A among Phl banks

MANILA, Philippines - The planned capital hike for all Philippine banks and the Asean economic integration will result in further consolidation of the country’s banking system, according to Maybank ATR Kim Eng.

In a recent report, the regional financial institution said three commercial banks and another 51 thrift banks would be hard pressed to comply with the capital increases said to be implementable within the next five years.

The Bangko Sentral ng Pilipinas (BSP) is eyeing minimum capital for universal banks (otherwise known as expanded commercial banks) to balloon from the present P4.95 billion to P20 billion.

For commercial banks, it could be increased to P10 billion from the existing P2.4 billion. For thrift banks, it could expand to P2 billion from P325 million (Metro Manila-based) and from P52 million from thrift banks outside Metro Manila.

Thrift banks not allied with larger commercial banks or conglomerates will be hard pressed, leading to huge opportunities for acquisitions by larger thrift banks or commercial banks. A case in point was the acquisition by China Banking Corp. (China Bank) of Planters Development Bank.

Talk has it that several well-capitalized universal banks are interested in the United Coconut Planters Bank (UCPB) while Bank of the Philippine Islands (BPI) is always in the look out for “a game-changing acquisition.”

The last increase was made 15 years ago and the banking industry has grown more than five-fold since.

“The potential capital hike will ensure wider risk exposure, and is proportionate to the structure of banks’ balance sheets. Banks will have five years to comply with the new minimum capital,” the Maybank report said.