Why is Bank of Commerce doing an IPO?
I’ve had a large number of readers write in to ask slightly different versions of this question.
Some cite the relatively small size of the offering, in a “why would they even bother?” sort of way, while others wonder if perhaps the San Miguel [SMC 107.00 4.19%] group of companies is looking for a quick hit of capital.
As Will Cabagnon said to me on Twitter earlier this week, the real motivation for the IPO is regulatory.
Bank of Commerce [BNCOM 12.00 pre-IPO] applied to upgrade its banking license from “commercial” (restricting its activities to deals with SMC Group companies) to “universal” (allowing it to deal with anyone), and the BSP granted the upgraded universal license, but only if BNCOM satisfied a series of conditions to the license.
One of those conditions, of course, is for BNCOM to publicly list through an IPO on the Philippine Stock Exchange.
From that perspective, the size of the offering makes a little more sense. Why give up more of an asset than you need to give up?
MB BOTTOM-LINE
I think this should put to rest any talk of the SMC Group needing money, or any troubles with the bank itself.
Going public is just SMC and BNCOM checking a box on its universal banking license scavenger hunt.
Now, the big question is this: does knowing that bit of info make this listing more or less appealing to investors? On the one hand, you could say that BNCOM is taking money from investors without needing it, and I think that’s largely true.
That said, on the other hand, it’s not like any bank is going to struggle to figure out what to do with a bunch of extra billions, and it’s not like BNCOM is going to break a sweat putting that money to work. Banks make money. BNCOM is well capitalized.
The big question then becomes: is BNCOM’s offer price attractive relative to the value it represents? That’s more of an open question.
I hope to follow-up my clunky first attempt at analysis later this week to do a better comparison between BNCOM and its peers/contemporaries, like EastWest Bank [EW 8.45 0.71%], Asia United Bank [AUB 43.10 0.12%], and Philippine Savings Bank [PSB 55.10 2.82%].Stay tuned!
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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