MANILA, Philippines - Ayala Corp. is increasing its stake in Bank of the Philippine Islands (BPI) to 44 percent following its purchase of more than half of the shares held by Singapore-based DBS Group in the country’s largest bank by market capitalization for P25.6 billion.
DBS, Southeast Asia’s largest lender, will be left with a 9.9-percent ownership in BPI and will continue to be represented on the board of directors of the Ayala-led bank.
DBS has been a strategic shareholder of BPI since 1999, having invested around $1.2 billion for a 19.7-percent stake in the Ayala banking unit.
“This partial divestment is in line with DBS’ disciplined capital management and strengthens its capital position ahead of the introduction in Singapore of Basel III in 2013,” Ayala said.
Jaime Augusto Zobel De Ayala, chairman and chief executive officer of Ayala, noted that “DBS has been and will continue to be a valuable strategic partner in the governance and management of BPI.
“They have been a significant part of many of the bank’s milestones and achievements for over a decade. We look forward to continuing this partnership with them in succeeding years.”
The transaction enables DBS to maintain a meaningful exposure in BPI, which it deems to be an attractive investment, in a capital-efficient manner, Zobel said.
The divestment comes at a time when the Philippine stock market has risen nearly 23 percent this year. Last week, BPI’s share price hit an all-time high of P81 each share.
Banks across the globe have been paring down minority stakes in financial institutions as they scurry to meet the capital requirements set forth in the new Basel III, a global banking standard.
For his part, Ayala president and chief operating officer Fernando Zobel de Ayala said: “We believe this is a value and earnings accretive acquisition for Ayala given our view on the growth trajectory of the bank over the medium term. This reflects our confidence in the growth potential of BPI particularly amidst the projected expansion of the Philippine economy over the next few years.”
“As a holding company we always look for ways to strengthen our portfolio and take advantage of opportunities that will enhance the value of our holdings while also continuing to ensure the stability of the shareholder base in each of our business units,” he added.
Ayala chief finance officer Delfin Gonzalez said the conglomerate’s current financial position and low gearing level provide more than adequate room for it to invest in new growth areas while also optimizing the value of its existing portfolio.
As of end-June this year, Ayala had over P23 billion in cash.
Ayala earlier announced that it was investing $1 billion over the next five years in greenfield and acquisition opportunities in the power sector as well as in transport infrastructure projects under the government’s Public-Private Partnership (PPP) program.
To further beef up its cash reserves, the group is issuing P10 billion worth of bonds, the second fund-raising initiative it will be undertaking this year after the bond offer last May 2012 which generated P10 billion in cash proceeds.
As of the first half of this year BPI registered a net income of P9.4 billion, up 52 percent on robust growth in net interest income and is on track to deliver a sustainable 15-percent return on equity moving forward.