Merger of BPI units may cut asset base of thrift bank sector

MANILA, Philippines — The asset base of the country’s thrift banking industry may contract by as much as five percent amid the impending consolidation of the banking arms of the Ayala Group, according to the Chamber of Thrift Banks (CTB).

CTB executive director Suzanne Felix said the total resources of mid-sized banks may drop by 4.8 to five percent under the planned merger between Bank of the Philippines Islands (BPI) and wholly owned unit BPI Family Savings Bank Inc. (BFSB).

Felix said the largest mid-sized bank in the country accounts for about 28 percent of the industry’s asset base.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed BFSB is the country’s largest thrift bank with P305.57 billion in assets, P254.18 billion in deposits and P219.55 billion in loans as of end-September last year.

On the other hand, BPI is the country’s fourth largest universal bank in terms of assets with P1.88 trillion as of end-September last year. It ranked fourth in terms of deposits with P1.42 trillion and second in terms of loan book with P1.17 trillion.

The asset base of thrift banks in the country has been declining over the past two years, contracting by 7.4 percent to P1.15 trillion in 2019 from P1.24 trillion in 2018 and by two percent to P1.13 trillion in 2020 as major banks absorbed their thrift banking arms.

Philippine National Bank (PNB) absorbed PNB Savings Bank in 2018, while Rizal Commercial Banking Corp. folded in RCBC Savings Bank in 2019.

Other major thrift banks include Philippine Savings Bank (PSBank) of Metropolitan Bank & Trust Co. Inc., Philippine Business Bank, China Bank Savings Inc, City Savings Bank, Bank of Makati, Sterling Bank of Asia, UCPB Savings Bank, BPI Directo Banko and Producers Savings Bank.

Early this year, the board of directors of BPI approved a planned merger with BPFSB, subject to shareholders’ and regulators’ approvals, to create a customer base of 8.5 million.

The 169-year old bank hopes to complete the merger by January next year.

Aside from the potential synergies between the two entities, BPI also cited the reduction in the gap in regulatory reserve requirements (RRR) between commercial banks and thrift banks as a factor in the timing of the transaction.

Felix believes the 600 basis points difference in the RRR of big banks and mid-sized banks is big enough to maintain a thrift bank subsidiary.

“Right now, the 600 basis point gap in RRR is still significant for the bigger banks to benefit from having a thrift bank subsidiary,” Felix said.