BPI launches P10-billion rights offering

MANILA, Philippines - Ayala-controlled Bank of the Philippine Islands (BPI) is launching a stock rights offer expected to raise up to P10 billion in fresh capital.

In a disclosure to the Philippine Stock Exchange, the bank said its board of directors has approved the rights offer although the terms and conditions of the issuance, including the issue size and offer price, have yet to be finalized.

BPI said it will conduct the rights offer to grow its businesses and solidify its capital adequacy.

“The bank expects the rights issue to enhance its competitive differentiation versus its peers in the market as it seeks to capitalize on opportunities in the banking sector, while also addressing market expectations for higher core equity levels for financial institutions globally,” it said.

BPI has tapped JP Morgan (SEA) Ltd. as sole international lead manager and international lead underwriter, and BPI Capital Corp. as the domestic issue manager and domestic lead underwriter for the rights issue.

In the short to medium term, BPI said it plans to increase loans, develop new business segments, and broaden products and services.

“The bank is of the view that the Philippine banking sector presents significant growth opportunities in the short to medium term and is preparing to seize,” it said.

With the additional funds, new business segments could be complemented by introducing broader services and new banking products.

Recently, BPI formed a joint venture called BPI Globe Savings Bank (BanKO), a thrift bank driven by mobile phone technology, in partnership with sister unit Globe Telecom and parent company Ayala Corp.

It also entered into a remittance partnership with One Network Bank (ONB), the country’s largest rural bank with 75 branches spread out in Mindanao.

BPI has raised its capital in early 2009 ahead of its bid to acquire market-leading insurer Philippine American Life and General Insurance Co. (Philamlife), the local unit of troubled American financial giant AIG. The acquisition bid, however, did not push through, thus leaving the bank with a huge war chest.

Along the way, Philamlife acquired a controlling stake in Ayala Life Assurance Corp. (Ayala Life), the life insurance company subsidiary of BPI.

The deal was considered a win-win situation for both parties as Philamlife was able to continue selling policies through the branch network of BPI – an arrangement called bancassurance – while BPI earned through fees. In fact, earnings from bancassurance grew 500 percent last year.

Philamlife was selling a large number of policies when it was still in partnership with Equitable PCI Bank and later with Banco de Oro Unibank Inc. (BDO) until its contract expired last year.

The country’s third biggest lender by assets sees its net income growing 15 percent this year, driven largely by higher loans to consumers and small and medium businesses. In 2009, its net income climbed 33 percent to P8.5 billion from P6.4 billion in 2008.

BPI already accounts for 13 percent of the Philippine banking system’s total assets. It operates 831 branches and 1,573 ATMs nationwide.

In the first quarter of 2010, BPI reported a net income of P2.7 billion while its assets went up to P695 billion. Deposits expanded eight percent to P558 billion.