More EastWest shares offered at IPO price

MANILA, Philippines—The Deutsche Bank, underwriter and stabilizing agent of the East West Bank’s initial public offering, has exercised its option to take up additional shares of the bank to take advantage of strong investor demand.

In a disclosure to the Philippine Stock Exchange on Thursday, EW posted an advisory from Deutsche Bank reporting the exercise of the latter’s over-allotment option equivalent to 36.715 million EW shares at the same IPO price of P18.50 per share on June 5.

The foreign bank has likewise implemented “stabilization” trades on EW amounting to 82,100 shares at P18.50 on May 15.

The over-allotment, also called the green shoe, option allows IPO underwriters to sell more shares at the offering price in case of strong demand for the securities. It is deemed as a risk-free mechanism to stabilize share prices in the aftermath of the pricing of an equity deal.

EW recently sold to the public 245 million shares, raising P5.2 billion from this equity deal, which the bank plans to use for branch expansion and information technology infrastructure. Its offering was 240 percent oversubscribed, which PSE officials cited as a “testament to burgeoning investor appetite” among local and global investors on Philippine equities. The shares were listed on May 7.

Part of EW’s ambition is to grow its branch network to 350 by 2014 from about 150 at present. The bank wants to increase its presence in different banking areas especially in the so-called restricted areas of Metro Manila which are richest in deposits. It also wants to expand its nationwide footprint and expand in Visayas and Mindanao.

On prospective dividend policy, EW plans to focus first on building its distribution to attain the 350-branch target but after achieving this, it would like to put in place a regular dividend policy equivalent to 20-30 percent of earnings.

Meanwhile, EW’s capital increase also puts the bank in a stronger position to expand to universal banking, after earlier getting conditional approval from the Bangko Sentral ng Pilipinas to upgrade its status from regular commercial banking.