Banco De Oro acquires UOB branches for P600M

Banco De Oro Universal Bank (BDO), the banking unit of the SM Group of retail tycoon Henry Sy, has signed an agreement with Singapore’s United Overseas Bank Ltd. (UOB) to acquire the latter’s 66-branch network in the Philippines and certain deposit liabilities for P600 million.

In a disclosure to the Philippine Stock Exchange, BDO said the proposed transaction is in line with its long-term expansion plans and UOB’s ongoing efforts to rationalize its business operations so as to achieve cost-efficiencies and build a business platform that is consistent with the business prospects in the country.

UOB is planning to apply for conversion to a thrift bank to better reflect its increasing focus on wholesale banking and fee-based income.

"Since a full branch network is not essential for wholesale banking, UOB has decided to rationalize its branch operations," BDO said.

In exchange for BDO’s assumption of the branch network and deposit liabilities, UOB will transfer certain of its assets to cover for the servicing of deposits.

BDO said the proposed deal is subject to all necessary regulatory and corporate approvals, including but not limited to approvals by the Bangko Sentral ng Pilipinas, the Philippine Stock Exchange, the Philippine Deposit and Insurance Corp. and the Monetary Authority of Singapore.

BDO has been on an acquisition binge since its merger with Dao Heng Bank in 2001.

In 2002, BDO acquired First e-Bank, then owned by Metro Pacific Corp. Sixty branches were added, bringing BDO’s total current network to 179 branches. Before that, most of BDO’s branches were concentrated in Metro Manila, so First E-Bank branches gave them a foothold in the provincial markets.

A year later, BDO purchased Banco Santander Philippines Inc. and its brokerage arm, Santander Investments Securities. The latter allowed them to reach the more affluent and high net worth clients who require banking services and investment products more sophisticated than the mainstream branch products and services.

BDO is considering acquiring more banks even after its major shareholder, the SM Group, has taken majority control of another commercial bank in China Banking Corp.,

BDO agreed late 2003 to acquire the shares of pension fund Social Security System in Equitable PCI Bank for over P14 billion, but the deal has yet to be closed. The purchase will make BDO the single biggest shareholder in Equitable-PCI.

BDO reported a 33 percent growth in its net income last year to P2.01 billion from P1.51 billion in 2003.

With focus on the consumer market, deposits increased by 24 percent to P128.1 billion while capital funds went up to P19.3 billion due to net income and a preferred share issuance amounting to $50 million.

Net loans also went up by seven percent to P60 billion while total resources as of end-2004 stood at P179.15 billion, up by 20 percent from P30.1 billion a year ago.

Net interest income also improved 38 percent to P5.02 billion from P3.5 billion in 2003, on account of a 20 percent expansion in the bank’s balance sheet.

BDO’s strategy is to focus is on becoming a leading full-service bank in select markets in the Philippines. The bank’s principal markets are currently a select niche in the corporate market, the middle-market banking segment (consisting of mid-sized corporations) and the small- and medium-sized enterprise market and the retail/consumer market.

As part of its growth strategy, the bank aims to increase its share of the banking business of existing corporate clients. It also plans to expand its presence in the middle-market and retail segments,

capitalizing in part on the goodwill and distribution network of the SM Group in order to access the SM Group’s clients and suppliers.