BSP sees more banks merging in 2013

The Bangko Sentral ng Pilipinas expects to see mergers and acquisitions (M&As) in the banking industry in 2013.

After the central bank announced last year an enhanced set of incentives to encourage banks to consolidate, BSP Governor Amando Tetangco Jr. said that the regulator now expects several M&As involving small banks, and at least one involving big banks this year.

Late last year, Bank of the Philippine Islands expressed its interest in taking over Philippine National Bank, which is in the process of completing its merger with Allied Bank.

The central bank strongly encourages consolidation in the banking sector, believing that having fewer but stronger industry players is ideal.

The Philippine banking sector is reported to have too many players, mostly small ones.

BSP data as of end-June last year showed that there were 37 universal and commercial banks, 69 thrift banks, and 606 rural and cooperative banks operating in the country.

The number of rural and cooperative banks actually went down from about 700 a few years ago, after the BSP ordered the closure of several establishments. Most small banks fail because of weak capitalization and management problems.

Regulators said that, given the strong financial condition of bigger industry players, they are encouraged to look for acquisition opportunities especially among rural banks.

In July 2012, the central bank launched the Strengthening Program for Rural Banks (SPRB) Plus, under which enhanced incentives are given to banks that will consolidate.

One such incentive allows a bank to put up branches in restricted areas in Metro Manila, while another entails a loan grant to beef up capital of merged entities.

According to BSP Deputy Governor Nestor Espenilla Jr., a few banks are currently in talks for possible consolidation under the SPRB Plus, but he refuses to identify the establishments for the moment.—Michelle V. Remo