Watch those SSS-GSIS shares in EPCI Bank

Owners normally direct banks with hushed conservatism. Not so in E-PCIBank where for weeks now five big share blocs have been brawling in court and the media instead of behind closed boardroom doors. Corporate control inflames their bruising tug-o-war. On one end strains the Go family to retain management title over Equitable, which it founded in 1950 and fused with Philippine Commercial and Industrial Bank seven years ago. On the other heave SSS and GSIS, the mandatory savings funds of private and state workers used in the merger. From the sidelights hedge the Romualdez and Sy clans on bets. It is yet hazy who will surface as winner. Preliminary bouts have sent E-PCIBank’s share price crashing from P52 to P49, where it hovers grossly undervalued, according to analysts. Equity dealers naturally will be focusing on a final showdown tomorrow in an annual stockholders meeting. But who will be watching if the millions of SSS-GSIS members will profit or lose from the hullabaloo?

That question springs from a sad history of SSS-GSIS fund misuse for behest deals. George Go, Equitable chair in 1998, succeeded in buying out PCIBank only because his patron, then-president Joseph Estrada, ordered the provident funds to aid him. Estrada is said to have pocketed kickbacks from the arrangement in which SSS bought 25.8, and GSIS 12.1, percent of PCIBank. Members lost hundreds of millions from it, the same way they did in forced buy-ins to BW Resources a year later. George has since fallen with Estrada, and his brother Antonio took the helm to erase the memory of the bank’s harboring Estrada’s alias Jose Velarde deposits. Share prices began to recover from the bank run that coincided with EDSA-Dos. On Dec. 30, 2003, new trustees offered to sell SSS’ holdings to Henry Sy’s Banco de Oro. The Senate smelled a rat in the announcement made on a holiday. The tag was a tantalizing P43.50 per share when E-PCIBank stock was trading at P38, but payment was to be made only after six years, at which time the price would have risen higher. Senators thumbed down the deal, warning SSS trustees of lawsuits if they persisted.

E-PCIBank’s share value did grow since 2003 under Antonio Go’s tutelage. From P38 then, it rose to P52 by May 2005. It sank to P49 in June from investors’ worries over the owner infighting, Still, Philippine Equity Partners Inc., an investment counselor, calculates E-PCIBank to be worth P57 to P66 per share. The undervaluation stems from "the noise," it says, created by SSS and GSIS.

Backed by GSIS, SSS is now angling to control E-PCIBank’s board of directors. With their combined 37.9-percent shares, they argue, SSS and GSIS must enjoy more seats than the Go family’s combined 25.2 percent. Henry Sy, who had acquired almost three percent before last year’s E-PCIBank stockholders meeting, but was barred from voting it because of Banco de Oro’s competing interest, reportedly is backing SSS too. This makes senators suspect if the SSS and Sy are pulling a new trick since the 2003 deal was struck down. The Romualdez family of Kokoy, ex-President Ferdinand Marcos’s brother-in-law, holds a swing vote of 7.12 percent. The shares are sequestered, but the government allows them to hold one board seat. A Romualdez sits as vice chair, along with SSS president Corazon dela Paz, and has in many occasions sided with the latter. Tomorrow’s meeting will unravel which party will end up dominating the board.

The battle has had its casualties since May. First to fall was former environment secretary Fulgencio Factoran, who joined the board in 2001 first as representative of GSIS, later of SSS. The Gos had him yanked out allegedly for creating trouble. SSS retaliated by questioning the pro-Go stance of "independent" director Roberto Romulo, a former foreign secretary. SSS and GSIS threatened to sue him for failing to disclose his chairmanship of Equicom Systems Management Inc., supposedly an E-PCIBank subsidiary. They called this a violation of the bank’s charter, which forbids independent directors from being employees or officers of the bank or its affiliates. While denying Equicom’s link to E-PCIBank, Romulo withdrew his nomination from tomorrow’s board election. SSS and GSIS scored another victory in the case of EBC Investments, a wholly owned E-PCIBank subsidiary. EBC used to vote with the Gos, but the Monetary Board ruled early this month that its votes should now be equitably divided among the contending parties, depending on their listed share percentages.

With EBC votes divvied up, plus the Sy and Romualdez blocs leaning towards SSS and GSIS, the Gos look headed from trampling. Their chances of holding on to management depend on the assent by 16 percent assorted minority shareholders of Antonio’s performance. This highlights, however, the very bid of SSS-GSIS to take over the management.

SSS and GSIS trustees are presidential appointees, and the agents who sit in boards of private companies in which they have investments are, by extension, government nominees as well. Government holds a poor track record of running businesses. If the SSS and GSIS fronts grab control of E-PCIBank, will they be any different from the slew of government men who have run businesses to the ground? On that question rest the savings of the two provident funds’ member-contributors.

The answer will come tomorrow, if E-PCIBank’s share price zooms to the predicted P57-P66, or drops further from the present shaky P49.

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