S’pore bank eyes bigger BDO stake

Singapore’s United Overseas Bank Ltd. (UOB) is eyeing to raise its stake in Banco De Oro Universal Bank (BDO) from 2.4 percent to as much as eight percent, a top BDO official said.

"They are willing to take a much bigger stake in Banco de Oro but we have agreed jointly that we should take it slowly, one step at a time," BDO president Nestor Tan said.

UOB recently sold 66 of its 67 Philippine branches to BDO for P600 million in exchange for a 2.4-percent equity in the banking unit of the SM Group.

But Tan said UOB would need about P2 billion more to increase its exposure in BDO and secure at least one seat in the bank’s board of directors.

UOB is a leading bank in Singapore and a dominant player in Asia-Pacific. As of end-2004, the UOB Group had total assets of

S$134.9 billion and shareholders’ funds of S$13.4 billion.

UOB provides a wide range of financial services through a global network of branches/offices and subsidiaries/associates. It has a vast network of 385 offices around the world, operating 61 branches in Singapore and over 380 offices in Australia, Brunei,

Canada, China, France, Hong Kong, Indonesia, Japan, Malaysia, Myanmar, Philippines, South Korea, Taiwan, Thailand, United Kingdom, the US and Vietnam.

But last month, UOB sold nearly all of its Philippine branches to BDO as the Singapore bank plans to convert from a commercial bank to a thrift bank to better reflect its increasing focus on wholesale banking and fee-based income.

Tan said BDO expects to complete the acquisition of UOB’s branches by October. The deal is still subject to all necessary approvals by the Bangko Sentral ng Pilipinas, the Philippine Stock Exchange, the Philippine Deposit and Insurance Corp. and the Monetary Authority of Singapore.

For its part, BDO said the purchase is in line with its long-term expansion plans and UOB’s ongoing efforts to rationalize its business operations in order to achieve cost-efficiencies and build a business platform consistent with the business prospects in the country.

"The partnership with UOB provides synergies, particularly in the areas of trade finance, credit cards and private banking," Tan said.

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

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

In 2002, BDO acquired 1st E-Bank, then owned by Metro Pacific Corp., to boost BDO’s branch network by 60 branches, bringing BDO’s total network to 179 branches and more importantly, giving the bank 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 BDO to reach the more affluent and high net worth clients who require more sophisticated banking services and investment products than the mainstream branch products and services.

BDO is now the country’s seventh-largest bank as it currently has a network of 184 branches and 327 automated teller machines, excluding those to be taken over from UOB.

Recently, BDO renewed its interest to buy into Equitable PCI Bank, the country’s third biggest bank, as it offered to buy the 10.8-percent stake held by Equitable PCI’s investment subsidiary EBC Investment.

In Dec. 2003, BDO offered to acquire the 29-percent shareholding of the Social Security System (SSS) in Equitable PCI but the deal has yet to materialize due to a pending court case filed by some SSS members stopping the sale since no public bidding had been held.

For EBC Investment’s stake, BDO offered the higher value of P43.50 per share, the same price it put forward for the SSS shares, or a 10 percent premium over the weighted average share price of Equitable PCI in the stock market over a period to be mutually agreed upon.

Tan estimated BDO would need about P8 billion for the SSS shares and another P3 billion for EBC Investment.

Tan said BDO’s growth strategy is to focus is on being a leading full-service bank in select markets in the Philippines. Its 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, BDO 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 group’s clients and suppliers.

BDO is considering acquiring more banks even after its major shareholder, the group of retail tycoon Henry Sy, has taken majority control of another major commercial bank China Banking Corp.

Last year, BDO posted a 33 percent hike in its net profit to P2.01 billion from P1.51 billion in 2003 and expects earnings to grow 25 percent more this year to around P2.5 billion.