Allied bank transfers holdings in US to expedite PNB merger

MANILA, Philippines—Lucio Tan banks’ Allied Banking Corp. and the Philippine National Bank moved another step closer towards their long-awaited merger as Allied announced the transfer of its holdings in a California bank to a trust fund, to be later sold to third-party investors.

In a disclosure, Allied Bank said it had forged a voting trust agreement, with fund manager Walter Mix III appointed as trustee, which would hold the lender’s shares in Oceanic Bank in California.

The shares in Oceanic Bank would be later sold to third parties, “which will facilitate the merger of Allied Bank and PNB,” the company said.

Allied Bank is required by US banking regulators to divest its stake in Oceanic Bank prior to its merger with PNB.

The divestment is necessary given the prevailing US banking regulations on the entry of new foreign banks, which is deemed applicable to PNB when it assumes ownership of Oceanic Bank by virtue of its merger with Allied Bank.

This requirement caused the delay in the completion of the PNB-Allied Bank merger, which was targeted to happen by the end of 2008. Allied Bank said the creation of a trust fund would still have to be approved by the US Federal Reserve Board.

The company declined to give further details about the transaction.

Allied Bank currently owns about 28 percent of Oceanic Holding Ltd. The controlling stake in Oceanic Bank of more than 70 percent is owned by the family of Lucio Tan and other family members and business partners.

The lender is a small but profitable bank headquartered in San Francisco catering to Asian-Americans.

Transferring the ownership of Oceanic Bank will pave the way for the merger of PNB and Allied Bank. PNB, which will be the surviving entity, will emerge as the fourth largest bank in the local industry.

Last year, PNB posted a net income of P3.54 billion, a record high in recent years, as hefty trading gains complemented steady interest earnings.