Spin-off of PNB real estate subsidiary seen completed this year

Tycoon Lucio Tan-led Philippine National Bank (PNB) aims to complete within this year the spin-off of a company that will unlock values from the bank’s most valuable but currently low-earning real estate assets.

PNB earlier disclosed the infusion of certain real estate properties into wholly-owned subsidiary PNB Holdings Corp. (PHC) in exchange for additional shares in the latter valued at around P46.7 billion. Upon subscription to the additional shares, PNB will have 99.46 percent control of the outstanding shares of PHC.

In a briefing on Friday, PNB president and CEO Wick Veloso said the bank was still awaiting regulatory approval for the transaction but expressed confidence that this could be done within this year.

PNB has not disclosed details on the transaction but earlier bank presentations to investors cited three valuable assets waiting to be monetized: the 10-hectare head office along Macapagal Avenue, the old Allied Bank building in Ayala Avenue and the 8,000-square-meter prime lot foreclosed from musician Ramon “RJ” Jacinto. The total fair value of these three properties is estimated at P50 billion, larger than PNB’s current market capitalization of P36.8 billion.

While PNB has announced plans to realize values from prime real estate assets, it did not provide details on the transaction. Asked whether PNB was keen on selling shares in the spin-off real estate firm PHC to a joint venture partner instead of selling each of these properties outright, Veloso said “we’ll cross the bridge when we got there.”

Instead of an outright sale of properties—which typically no longer requires regulatory approvals, PNB has the option of unlocking values from these assets by going into a joint venture with a property company that will develop these assets. There are expectations that the shares in PHC will be sold to a partner but PNB may retain some interest. Veloso did not refute such a possibility.

“If this materalizes, the kind of structure you’re saying, the company (PHC) won’t be under our control anymore. It will be their (new investors’) call,” he said.

Veloso noted, however, that it was a priority for the bank to make money out of its prime real estate assets.

“Once we are able to do that, it will allow us to increase the amount of risk-weight assets to make PNB lend more and be able to do more business,” he said.

Meanwhile, PNB is embarking on a “transformation” program to make its operations more efficient. A team has been created to review which processes and offices can be rationalized.

“It is no longer the case where you can afford offices that are side by side. Those are business models of the past. Technology is helping us but at the same time we are also being rational. We will review and correspondingly, recommendations will be made to allow us to be more agile,” Veloso said.

Recently, Philippine National Bank was recognized by Singapore-based publication The Asian Banker as “Best Managed Bank” during COVID-19 while Veloso was named “Best CEO.”

“As the bank navigates through this challenging business environment, our focus has been to ensure uninterrupted service to the bank’s customers and make meaningful contributions on initiatives to help our customers and support the economy. We have been working closely with many of our customers in striking a balance between exploring business opportunities and effectively managing programs intended to relieve financial pressure on our customers while mitigating the increasing credit risk.”