Union Bank acquires 55% of rural bank in Iloilo

The Union Bank group has signed a deal to acquire 55 percent of Progressive Bank Inc. (PBI), a rural bank in Iloilo that has been serving the province for over four decades.

In a disclosure to the Philippine Stock Exchange, Union Bank said its thrift bank arm, City Savings Bank, had signed an agreement to acquire 49 percent of PBI while Union Properties Inc. would acquire 6 percent of the rural bank.

The deal involves the purchase of 11.98 million common shares in PBI amounting to P3.34 per share, the disclosure noted.

The acquisition is still subject to the approval of the Bangko Sentral ng Pilipinas and other regulatory agencies, Union Bank said.

City Savings enjoys a return on equity—at around 20 percent currently—that is seen high enough to sustain an annual growth of 15-20 percent and still buy a few banks on the side.

Earlier this year, it signed a deal to acquire 51 percent of cash remittance and payments firm Petnet from ultimate parent conglomerate Aboitiz Equity Ventures. It also bought Philippine Resources Savings Bank in 2017 and Bogo-based lender First-Agro Industrial Rural Bank Inc. in 2016.

City Savings normally contributes P3 billion or about 30 percent of Union Bank’s net profit but this year, its contribution will be lower because of the eight-month suspension of a teachers’ salary loan program when the Department of Education fine-tuned its accreditation settings. The situation, however, has been resolved and is expected to boost earnings this second half. —DORIS DUMLAO-ABADILLA