Japan’s biggest bank invests in PH

Photo by Doris Dumlao-Abadilla/INQUIRER

Japan’s biggest banking group, Bank of Tokyo-Mitsubishi UFJ (BTMU), has struck a deal to buy a 20-percent stake in Security Bank for P36.9 billion, touted as a “game-changing” partnership seen catapulting the local bank to become the country’s fourth biggest in the next few years.

The banking unit of Mitsubishi UFJ Financial Group signed on Thursday an agreement to acquire 150.7 million new common shares of Security Bank at P245 a share, achieving a premium of 81 percent over Wednesday’s closing price of P135 a share. The Japanese group is also buying 200 million preferred shares at P0.10 each. Security Bank’s shares rose by 6.67 percent to close at P144 per share after the deal was announced.

Expected to be completed within the first half of this year, the deal will jack up the market capitalization of Security Bank—already the fourth most valuable Philippine bank to date—to P147.7 billion from around P81 billion. This brings the bank closer in value to its three biggest local peers: Banco de Oro (P357 billion); Bank of the Philippine Islands (P333 billion) and Metropolitan Bank and Trust Co. (P229 billion).

Go Watanabe, chief executive at BTMU Asia and Oceania region, said the Japanese bank agreed to pay this much after evaluating the “intrinsic” value of Security Bank based on future prospects. “It’s not an auction type of transaction. We’ve been talking for over one year and we analyzed it and we realized the intrinsic value of Security Bank—not at this moment but in the future, moving forward,” Watanabe said.

The buy-in deal was valued at 2.8 times Security Bank’s book value of P86.77 a share as of end-September or 2.1 times the adjusted book value of P118.42 on a pro-forma basis or assuming that the fresh investment had been sealed.

BTMU has been operating in the Philippines for more than 60 years, first as a representative office then setting up a lone branch during the banking liberalization program in the mid-1990s. However, it has maintained only a single branch in the country since then.

With the Philippines rising to be among Asia’s fastest growing economies on the back of its vast and mostly young consumer base—and likewise attracting a new number of new foreign banking players with a new round of banking liberalization—BTMU decided to widen its footprint in this market.