Export Bank on verge of breaking even
By Doris Dumlao
Philippine Daily Inquirer
First Posted 20:21:00 09/28/2008
Filed Under: Economy, Business & Finance,Banking
EXPORT BANK OF THE PHILIPPINES is about to turn its fortunes around after taking over Urban Bank in 2001 on the back of a steady improvement in core commercial banking activities, revitalized manpower and the recovery of the local property market.
As such, Exportbank chair Jaime Gonzales told the Inquirer that his bank was now seen as an attractive target for larger players and could be part of another merger or consolidation in the banking system.
But he stressed that no deal was likely anytime soon because of depressed stock prices caused by the global financial shakeout that started on Wall Street.
“You have to let the dust settle, but the basic principle continues to be the same—the country needs bigger and better run banks which will produce better values for everyone,” Gonzales said.
“And for banks to get together and be more efficient, bigger, well capitalized, it can only be good. But to do all of that is easier said than done. In this environment where some of the banks are selling below book (value), how can you expect them -- both from a buying and a selling standpoint, to agree?” he added.
Exportbank is 37 percent owned by the Hong Kong Lippo group, 22 percent by Gonzales’ AO Capital, 20 percent by juice magnate Alfredo Yao who owns the Zest-O group, 9.5 percent by the RZB group. The rest is held by the public.
After a long delay, Gonzales said ExportBank would file its audited financial statement for 2007 with the corporate and banking regulators over the next few days.
The bank’s latest audited financial statements, Gonzales said, would indicate a favorable trend.
“We’re virtually there,” he said, when asked whether the bank would finally break even.
“It takes time to turn around, but you will see a clear trend. It’s very, very clear that things are turning around,” Gonzales said.
“There’s still a lot of work to be done. We have to improve our branches, build up our Casa (current account and savings accounts or low-cost deposits) and loan portfolio. There’s still a lot of work,” he said.
Gonzales added that this year would continue to be very challenging, but that the bank was on track with its goal of building a stronger and more efficient bank catering to the country’s second-tier corporations.
He said efforts would focus on three areas -- core lending, treasury and trust operations.
“Basic banking business is going to have a premium in this environment,” he said. He added that the bank was benefiting from a rebound in the property market, as it inherited some prime property assets from Urban Bank.
In the past year and a half, Gonzales said the bank was also hiring new people to revitalize the organization.
Close to half of its staff are new hires, including bank president Nilo Pacheco, formerly EVP of International Exchange Bank handling branches and Benjo Arcinas, a treasury veteran.
Gonzales himself became chair of the bank in May 2006.
In 2006, the bank got a P3-billion fresh capital infusion from the Hong Kong-based Lippo group and other investors and forged an agreement with the state-controlled Philippine Deposit Insurance Corp. to unload P10 billion worth of bad assets inherited from the defunct Urban Bank group.
The PDIC agreed to purchase those bad assets at a discount of 70 percent, in effect paying P3 billion for the P10 billion in bad assets. At the same time, it provided income support to cover the discount from the sale of these assets by way of a P7-billion soft loan for 10 years, which will be fully secured by government securities.
Aside from the P3-billion core capital infused by the Lippo group and other investors, the PDIC also subscribed to a P2-billion tier 2 capital in the form of interest-bearing subordinated debt, which will be payable to the deposit insurer in 10 years.
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