Share swap seen in July or August

Philippine National Bank (PNB) and Allied Banking Corp., both controlled by tobacco magnate Lucio Tan, are expected to merge through an exchange of shares in July or August to create the country's fourth-biggest bank.

In an interview, PNB president Omar Mier said the minority shareholders of PNB had mandated Swiss bank UBS as financial adviser for the merger. Dutch bank ING was earlier named adviser by the majority shareholders.

"ING is the adviser to do the swap ratios for the stockholders. After that, they'll do a presentation, and then sometime in May [the board] shall approve that," Mier said.

ING was also the financial adviser that worked on the terms of a share-swap between the former Equitable PCI Bank and Banco de Oro Universal Bank, the most recent and the biggest merger in Philippine banking history that formed the country's second-largest bank in assets.

The PNB-Allied merger structure will then be formally presented to PNB shareholders at a meeting in June, Mier said.

He said the merger through an exchange of shares between the two banks would be done in July or August.

The union will allow PNB, currently the country's sixth-biggest privately owned bank in assets, and which is expected to be the surviving entity, to boost its ranking to number four with consolidated resources of close to P400 billion.

If the reckoning excludes state-owned Development Bank of the Philippines and Land Bank of the Philippines, PNB after the merger would be “solid number four" in assets, Mier said. "In terms of branches, we'll be number three."

PNB and Allied together will have a branch network of 610. PNB has 324 and Allied has 286.

Both banks are also beefing up their capital adequacy ratios ahead of the merger. On Friday, PNB disclosed to the Philippine Stock Exchange that its board had approved the offering of up to P6 billion worth of subordinated notes that would qualify as tier 2, or supplementary, capital.

Mier noted that PNB, at present, had a capital adequacy ratio-or cash buffer against risky assets-of 19 percent against the central bank’s minimum requirement of 10 percent.

The merger between PNB and Allied Bank is moving forward after the Supreme Court nullified the government's sequestration of Lucio Tan-controlled companies, including Allied Bank. PNB, once the country's biggest bank, was only waiting for settlement of the sequestration issue to pursue the merger with Allied Bank.

The Lucio Tan group controls 67 percent PNB, which has total assets of P240 billion. The bank has a market capitalization of about P18.5 billion and a public float of 33 percent, including a fund managed by investment bank UBS.

Allied Bank is about 75 percent controlled by Tan.

Analysts said the union would be a win-win situation and in line with the ongoing consolidation in the Philippine banking system. They said it would result in cost-synergies and more efficient marketing of products.

It is also expected seen to increase lending to affiliate companies in the Lucio Tan group because the nominal single borrower's limit will rise as a percentage of combined loan portfolio. With editing by INQUIRER.net

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