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Web-only Exclusives November 30, 2000 From Our Correspondent: Hirohito and the War A conversation with biographer Herbert Bix From Our Correspondent: A Rough Road Ahead Bad news for the Philippines - and some others From Our Correspondent: Making Enemies Indonesia needs friends. So why is it picking fights? |
SEPTEMBER 10, 1999 VOL. 25 NO. 36
After The Buyout
Equitable digests PCIBank
FINANCIAL 500 1999
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THE 500
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George Go is working very long hours these days. The chairman of Equitable Banking Corp., the Philippines' eighth-largest lender, is also overseeing fifth-ranked PCIBank. The smaller institution acquired PCIBank for $835.9 million three months ago. Once the merger is finalized, the new Equitable PCIBank will become the nation's second-largest financial institution with $6.6 billion in resources. "We will be No. 1 in three years and a major regional player in five years," says Go. He believes that in the next century, "you have to be the largest to really matter."
It will take some doing. "It's hard for a small bank to acquire a much bigger bank," says Antonio Abacan, president of Metrobank, currently the country's leading institution with $7.4 billion in assets. Indeed, Go has discovered that PCIBank's non-performing loans are considerably higher now than at the time of the purchase - 16% of loans outstanding compared with 12%. To beat other bidders, the Equitable-led consortium had offered to waive a due-diligence study of PCIBank's finances. Theoretically, the rise in bad loans means PCIBank has lost $75 million of its value over three months.
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Go hopes to fully sort out the merger in 18 to 24 months, after which he will line up a foreign partner. (Equitable controls 38% of PCIBank, while two state-run pension funds, which joined Go in the successful bid, each owns 17%.) The combination of fresh capital, quality service and Equitable PCIBank's 476 branches (versus Metrobank's 388), he says, "will make us No. 1." In addition, the new bank will leverage its combined base of 1 million credit cardholders, the largest in the industry. "We hope to tap them for other financial services like car and housing loans, insurance and deposits," says Go.
He will not have it all his own way. "Metrobank will try to keep its leadership," says Abacan. After failing to buy PCIBank, the largest lender bought Philippine Banking Corp. (assets: $355 million), which it will merge with an affiliate, Global Business Bank. Metrobank is also talking with medium-sized International Exchange Bank. Meanwhile, 10th-ranked Allied Bank (assets: $2.3 billion) is eyeing Philippine National Bank (assets: $5.1 billion), which is partly owned by the government. Allied Bank is controlled by tycoon Lucio Tan, an ally of President Joseph Estrada. And second-ranked Bank of the Philippine Islands, also a failed PCIBank bidder, is interested in No. 6 Far East Bank. If it transpires, that merger would create a $9-billion entity that would dwarf everyone else.
Both Go and Abacan see a reshaping of the Philippine banking industry through a series of mergers, acquisition and consolidation. "At the end of the day, the central bank wants only six to eight banks in the Philippines," says Abacan. The major players are making sure they are among the chosen few.
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