BDO takes in Singapore equity fund as partner in rural bank unit

Leading Philippine lender BDO Unibank has sealed a deal to bring in a unit of Singapore-based private equity firm Archipelago Capital Partners Pte. Ltd. as a strategic investor in its Davao-based rural bank subsidiary One Network Bank Inc. (ONB).

In a disclosure to the Philippine Stock Exchange on Friday, BDO said it had consummated the agreement to sell a 15-percent stake in the country’s biggest rural bank to Archipelago unit Osmanthus Investment Holdings Pte. Ltd.

Ahead of the closing of this deal, Osmanthus has been helping ONB develop the framework for its micro, small and medium enterprise lending business, leading to the establishment of the initial pilot test sites by end-2017.

BDO said it expected the partnership with Osmanthus to further strengthen ONB’s strategic foothold in the microfinance business, thus contributing to financial inclusion.

As a private equity firm, Archipelago Capital focuses on growth opportunities and high-potential small and middle market businesses, especially in the consumer, financial services and niche industrial sectors, in Southeast Asia. Its investment philosophy is centered on “active” ownership, with value driven through “creativity in strategy and excellence in execution in all its investments.”

BDO retained an 85-percent ownership at ONB, thus providing continued financial and operational synergies to the rural bank. It earlier shelved a deal to sell a 40-percent stake in ONB to a unit of US-based global private investment firm TPG as the funding commitment was delayed.

ONB became a BDO subsidiary in 2015 when the latter bought a controlling stake from the Consunji family for P6.67 billion. This allowed BDO to broaden its market base.

BDO sees net profit this year hitting a new high of P38.5 billion, driven by a continued double-digit expansion in loan book, improved margins and steady fee-based income. About a quarter of the full-year target had been achieved in the first three months of the year, during which BDO grew net profit by 66 percent year-on-year to P9.8 billion.

Excluding the increase in trading gains, core net income would have risen by 21 percent in the first quarter. Net interest income rose by 25 percent year-on-year to P27.7 billion in the first quarter, driven by a change in loan mix that increased higher-margin segments like consumer and middle market, alongside the growth in low-cost current account and savings account deposits.