FDI boost seen from SBC deal

MANILA, Philippines – The P36.9-billion investment by The Bank of Tokyo – Mitsubishi UFJ Ltd. (BTMU) for a 20 percent stake in Security Banking Corp. is seen to boost foreign direct investments in the Philippines, American banking giant Citigroup said.

Citi senior economist Jun Trinidad said the deal between Japan’s largest bank and the mid-sized Security Bank would have a long-term positive effect on the country’s Foreign Direct Investments (FDI) inflows.

 “Other than Japanese FDI effect and immediate lift to official reserves, the latest Japanese bank entry supports prospective Japanese FDI,” Trinidad said.

 Latest data from the Bangko Sentral ng Pilipinas (BSP) showed FDIs recording a net inflow of $4.98 billion from January to October last year, down 4.9 percent from $5.25 billion in the same period in 2014.

 The BSP sees FDI inflows rising to $6.3 billion this year from the projected $6 billion a year ago amid the country’s strong macroeconomic fundamentals and the implementation of much needed infrastructure projects under the public private partnership (PPP) scheme.

 Last Thursday, Security Bank and BTMU inked the largest equity transaction involving a financial institution by a foreign investor in the Philippines.

 Under the agreement, BTMU would acquire 150.71 million newly issued Security Bank primary shares at P245 per share, representing an 81 percent premium over the market prices, and 200 million preferred shares at P0.10 apiece.

 In exchange, BTMU would acquire a 20 percent stake in the listed bank and get two board seats.

 The acquisition is expected to close in the second quarter of the year.

BTMU would become the second largest shareholder in Security Bank next to the Dy Group.

 With the equity infusion, Security Bank will be able to raise its capital base to P89.3 billion from the end-September level of P52.4 billion. Its branch network would grow much faster to more than 500 branches by 2020 from the current 262 nationwide.