Philippine Bank of Communications has mapped out a capital-building program to fund future expansion and is now considering the acquisition via bidding of a controlling stake in United Coconut Planters Bank.
PBCom, a commercial bank led by the group of businessman Eric Recto and British fund Ashmore, recently announced its options in beefing up capital to acquire more room to expand under the stringent Basel 3 capital adequacy ratio (CAR).
Asked about his bank’s rumored interest in UCPB, Recto said in an interview that “it’s an interesting asset, for sure…. Ashmore and a few other investors have expressed to me their interest to pursue … UCPB.”
But Recto pointed out that, once the details of what would be offered were clear, that would be the time for PBCom to decide whether it would bid for UCPB.
Among the banks that have previously indicated interest in bidding for a controlling stake in UCPB are Banco de Oro Unibank, Union Bank of the Philippines, East West Bank, Philippine National Bank and San Miguel Corp.-led Bank of Commerce.
UCPB has about P265.2 billion in resources—the 12th largest bank in the country. A controlling interest in UCPB, representing the stake sequestered by the Presidential Commission on Good Government, is expected to be put on the auction block to allow the bank to boost capital amid a regime of tightening regulations under the Basel 3 global framework.
Basel 3 is a complex package designed to improve the ability of banks to absorb losses. It also extends the coverage of financial risks and requires stronger firewalls to protect banks especially during periods of stress.
Last week, PBCom’s board approved a plan to boost capital through a stock rights offering, sale of subordinated notes qualifying as tier 2 or supplementary capital under Basel 3, and equity sale through a private placement.
Recto said PBCom could raise as much as P1 billion from the sale of new shares to existing shareholders, or up to P2 billion from the sale of tier 2 notes. The third option is to raise fresh equity from private placement, but the amount is yet to be determined, he said.
These fund-raising options will allow PBCom to jack up its tier 1 CAR based on the Basel 3 framework to at least 15 percent, giving the bank room to expand risk assets, Recto said.
While the bank is currently compliant with the Basel 3 requirements, in force since the beginning of the year, PBCom still wants to put up a bigger buffer for expansion, Recto said.
“Competition is there. It’s not going to go away. But we’re optimistic that, with what we have set out to do, we will be able to compete well enough,” Recto said.
In a meeting last week, PBCom’s board of directors enabled Recto and bank president Nina Aguas to undertake capital-raising activities. The bank was likewise authorized by the board to engage the services of a financial advisor to determine the viability of the capital-raising options.
As of end-March, PBCom’s resources stood at P56.81 billion. Its capital base totaled P3.742 billion. Its loan portfolio amounted to P26.65 billion, while deposit base stood at P48.29 billion.