PSBank hikes capital ahead of banking consolidation

Philippine Savings Bank, the thrift banking arm of the Metrobank group, is undertaking a capital buildup in anticipation of the huge valuation and risk-based changes in the fiscal position of Philippine banks.

The move is also seen to provide the bank better opportunities for stability and expansion, as well as further consolidation of the banking system.

PSBank president Pascual M. Garcia III said the recent Tier 2 and planned rights offer will allow the bank to adjust to the new international accounting standards (IAS) and Basel II next year.

"Being prepared allows us the flexibility and prepares us for whatever opportunity comes with the full implementation of Basel II," Pascual said.

New regulations under the IAS and Basel II next year will require huge capital buildup for the banking system which is expected to result in several bank downgrades, reduced products and services, and consolidations through mergers and acquisitions.

At the same time, the improving economy opens more opportunities for lending, prospects for bigger deposits, and even acquisition of entire banks or their loan portfolios.

"We do not have to buy entire banks with their impurities, we could buy their potentially marketable or good loan portfolios," PSBank executive vice president Rolando A. Rodriquez added.

PS Bank raised P2 billion last January from a Tier 2 unsecured subordinated debt offer with a 10-year term.

It expects to raise at least P750 million more from a rights offer within the first semester of this year.

The two capital-raising activities would raise the bank’s capital adequacy ratio (CAR) to over 15 percent. The bank reported a net income of P356.6 million in the first three months of 2006, or 203 percent higher than the P117.5 million in the same period last year. Last year, net earnings already reached P646 million, or 30 percent bettter than the P497 million in 2004.

Total assets grew by 13 percent boosted by strong consumer lending which expanded to P29.4 billion at the start of April this year. Total deposits rose by almost eight percent to P46.1 billion.

Pascual said that 12 more branches will be opened this year to add to the existing 150 network. It likewise plans to operate 53 ATMs to add to its existing network of 147.