MANILA, Philippines - The acquisition by Mindanao-based One Network Bank (ONB) of the Rural Bank of San Enrique Inc. (RBSEI) of Iloilo last April 21 marks the first time ONB expanded outside the southernmost territory of the Philippines.
But more than that, Iloilo now serves as the springboard for ONB to expand in the Visayan region.
At the end of 2011, ONB has 82 branches, with 81 all located in Mindanao and one in Metro Manila, which serves basically as its coordinating office for the Bangko Sentral ng Pilipinas (BSP).
By the end of the first semester this year, five new branches in Mindanao would be onstream, bringing its total network to 87.
Next month, the six branches of the acquired RBSEI would be folded into ONB’s network. It has likewise applied for five new branch licenses with the BSP as part of the incentive package given to acquiring banks.
ONB president and chief executive officer Alex V. Buenaventura assured the employees of RBSEI that he intends to rehire everyone.
“There is nothing like the knowledge and experience that these employees have of the locality, that is their strength and importance,” Buenaventura said in a press briefing held in Iloilo City over the weekend.
Instead of receiving cash for the sale, the principal stakeholders of RBSEI opted for a share swap with ONB, “That was a sign of confidence from RBSEI that it was a positive long-term investment,” he added.
Last year, ONB reported a return on investment of 26 percent and return on assets of two percent.
RBSEI president Arturo P. Muyco Jr. said that the entry of ONB in the Visayas would introduce more modern and innovative banking practice for rural banks.
ONB vice chairman Antonio P. Avelino revealed that the Iloilo acquisition is the 12th bank license acquired by ONB through the consolidation and mergers and acquisitions (M&A) process.
The first six rural banks were consolidated over a number of years, which led to the formation of Network Rural Bank by 1993.
The following years saw a series of consolidations of several rural banks that formed the Community Bank of Malatan and the Provident Rural Bank of Cotabato (Probank).
By 2004, the number of consolidations peaked with the formation of a One Network Rural Bank, or the consolidation of Network Rural Bank, Probank and the Rural Bank of Panabo.
By 2011, the Rural Bank of New Corella was the 11th bank that joined the largest rural bank in the country, which reflected total resources worth P15.6 billion, a loan portfolio worth P10.3 billion, and a deposit base worth P10.5 billion.
The largest rural bank has a depositor base of 565,000, an employee base of 1,206, an automated teller machine (ATM) network of 114, and 1,000 point-of-sale (POS) terminals by 2013.
The number of rural banks has been shrinking in the past two years. In the middle of 2011, it shrunk to 629 compared to 661 in the same period last year, and 647 as of end-December. But the number of branches has been increasing.
The BSP reported that the number of branches of universal and commercial banks, thrift banks, and rural banks increased to 8,176 in the first half of the year from 7,912 in the same period in last year. Rural bank branches also grew to nearly 2,000 in the same period from the 1,993 in March 2011.
The monetary authorities continue to urge the country’s banking community to consolidate.
More regional competition is expected as the Asean Free Trade Agreement (AFTA) gets into full swing in 2015, and the Basel III capital framework will be fully implemented by 2015/2016.
It has several incentives in place to encourage consolidation, and will soon lay down new regulations for the easy entry of thrift and commercial banks into the rural banking sector.