China Bank hikes stake in venture with Manulife

MANILA, Philippines–The Bangko Sentral ng Pilipinas has approved the plans of SM group-led China Bank to raise its stake in a bancassurance venture with global insurer Manulife Financial Corp. and infuse P1.59 billion in fresh capital into China Bank Savings.

In a disclosure to the Philippine Stock Exchange on Thursday, China Bank said its board had obtained notice from the BSP approving the bank’s plan to hike its interest in Manulife China Bank Life Assurance Corp. (MCBL) to 40 percent from 5 percent.

At the same time, the BSP also approved the additional capital infusion into subsidiary China Bank Savings Inc. to retire debt notes issued by Planters Development Bank—which was acquired by the group early this year.

For the bancassurance venture, China Bank is raising its stake to unlock more values from the growing volume of business from this partnership with Canada-based Manulife.

When China Bank teamed up with Manulife in 2007, the plan was to eventually acquire a larger stake in the firm as the 5-percent initial stake acquired then was the minimum equity ownership requirement imposed by banking regulators for bancassurance operations.

Through this partnership, Manulife can sell insurance to Chinabank clients and the bank could in turn earn fees out of commissions. With a bigger equity stake, China Bank can increase its fee-based earnings.

In the meantime, the disclosure said the fresh capital infusion into China Bank Savings would be used for the early redemption of Planters Development Bank’s subordinated notes amounting to P1.7 billion.

The debt notes carry coupon interest rates of 10.25 percent and 8.75 percent per year and are maturing in 2019 and 2020.–Doris C. Dumlao