Banking and Finance Industry

[sugarboy]

Banco de Oro, Equitable PCI approve merger

By Doris Dumlao
Inquirer
Last updated 03:15am (Mla time) 11/07/2006

EQUITABLE PCI Bank and Banco de Oro Universal Bank, both controlled by mall tycoon Henry Sy, announced Monday approval of a merger that would create the country’s second-biggest bank, with assets of P613 billion.

The merger of currently the third and fifth largest banks will edge out the Ayala group’s Bank of the Philippine Islands from the number 2 slot in ranking based on asset size. BPI has about P529 billion in assets. At the top rank will still be Metropolitan Bank and Trust Co., has assets of P629 billion.

The merger will be done via a stock swap. Banco de Oro will exchange 1.8 of its shares for each share of Equitable PCI. The combined entity will be called Banco de Oro-EPCI Bank, with Banco de Oro as the surviving entity.

Teresita Sy-Coson will chair Banco de Oro-EPCI Bank. Her father, Henry Sy, will be chairman emeritus.

Banco de Oro president Nestor Tan will be the president of the merged bank. Equitable PCI Bank president Rene Buenaventura will become vice chairman for retail banking, while Jesus Jacinto will be vice chairman for corporate banking.

“It will significantly widen the combined entity’s base,” Sy-Coson said at a press briefing Monday. “We will be among the largest banks across all measure. We will have combined market capitalization of $2 billion.”

Governor Amando Tetangco Jr. of the central bank, Bangko Sentral ng Pilipinas, said, “The proposed merger of Banco de Oro and Equitable PCI will create a bigger and stronger institution which will be among the leaders in the industry.”

Tan said the legal closing of the transaction could be expected by the first quarter of 2007 and operational consolidation of all 698 branches would be completed in 24-30 months.

The merger plan was approved by the two banks’ directors in separate board meetings Monday. It was also approved by the Securities and Exchange Commission. The plan will be submitted to stockholders in December for the final imprimatur.

Under corporate law, a merger needs the consent of 67 percent of stockholders.

Sy’s SM group has yet to consummate its purchase of a 25.84-percent stake in Equitable PCI held by the Social Security System, but the state-run pension fund voted in favor of the merger with Banco de Oro.

At Banco de Oro’s closing price of P44.50 a share on Monday, the merger would be valued at about P80.1 for each Equitable PCI share. Equitable PCI closed Monday at P72.50 per share. With INQ7.net

[kevinb]

Is it true that BDO Unibank will buy BPI?

[Lili]

HSBC became one of the most successful global banks by merging with and/or buying small banks and community banks.

[sugarboy]

i like HSBC. i bank with them

[marites4]

Where would you cash a larger sum of dollars into pesos other than the bank. The bank rate is always way below the market rate isn't it? So if you're cashing a huge amount 5 pesos per dollar can be a big difference.

[sugarboy]

‘New head, new direction’ boosts RCBC stock
Inquirer
Last updated 04:53am (Mla time) 02/08/2007

SHAREHOLDERS of Rizal Commercial Banking Corp. (RCBC) together are P12.8 billion richer, with the stock price almost doubling in just a month, according to the latest data from the Philippine Stock Exchange.

The data show RCBC’s performance since early January has outstripped the stock market index and other banking stocks -- a behavior market watchers attribute to a recent change in the top management of RCBC, the banking arm of the Yuchengco group.

Market analysts believe the share price has benefited from the appointment of Lorenzo V. Tan as the new chief executive of RCBC.

“That can be part of the reason the price per share is aggressively rising,” UBS Securities research head Jody Santiago said. “Lorenzo Tan was instrumental in turning PNB [Philippine National Bank] around.”

Santiago added that sentiment toward the banking sector was also getting a boost from a favorable macroeconomic environment, which makes it easy for banks to raise fresh capital.

RCBC's capital adequacy ratio -- the proportion of equity to assets exposed to risk -- is one of the lowest among big-league banks.

On Wednesday, RCBC’s stock price ended at P44, up P1 from Tuesday, with P18.5 million worth of shares traded.

Since Jan. 5, the day Tan’s appointment was made public, the share price has risen by 83 percent.

[tigidig14]

you get $100 free added into your account if you sign up for bank of america as long as youre college under or graduate student, and deposit $25

you get $50 gift card if you sign up for la salle bank and deposit $50

you get $25 free if you sign up for charter one bank if you deposit $50, thats about a year and half ago. i dont know now

you get $25 worth of gift card from chase bank if you first open an account from them, get $15 if you open a savings account with $25 at least money deposit in each account.



and then after three months close them and tell that youre closing your accounts because you became unemployed and need that money for your rent

you get at least $8 every week if you open an IRA account cornerstone strategy fund at least $5000 to start with and $50 deposit each month

[jgacis]

What are some of the best banks to borrow from to buy a condo in MM? Such as lowest rates, least restrictions, etc..

I'm from the states, and obviously the requirements here in the US are different (but also with few basic similarities). Just wondering if most buyers here finance it through the developer or prefer their own choice of bank instead.

[sugarboy]

i heard from a friend that BDO is really flexing its muscles as the number 2 bank offering super low rates.

however, here are some figures from Metrobank....
(got this yesterday as i was eyeing something on the market)

LOAN AMOUNT: P 1.5million
fixed rate for 10 years : 10.99%pa
monthly ammortization : 20,654.01

LOAN AMOUNT: P 1.5million
fixed rate for 5 years : 9.75%pa
monthly ammortization : 31,666.37

LOAN AMOUNT: P 2million
fixed rate for 10 years : 10.99%pa
monthly ammortization : 27,538.68

LOAN AMOUNT: P 2million
fixed rate for 5 years : 9.75%pa
monthly ammortization : 42,248.49

[jgacis]

Thanks for the info. That gives me some idea of what some of the payment schemes and rates are from commercial banks.

I also heard in the news that the World Bank has praised the Philippines for its improved fiscal position, but wants the country to show sustainability and further reform of it's fiscal policies. They mentioned that Philippine banks need to show more liquidity in their foreclosed and repossessed properties. I don't know why they mention that, maybe because the banks want top dollar for their properties? Or maybe because the bidding process for repossessed properties are too complicated (or the process too lengthy) for most people. Hence, maybe the stock inventory of repossessed properties from banks continue to increase on an annual basis, which is not a good economic indicator. Any more insight on this?

Here in the U.S., a U.S. bank will also want top dollar for their repossessed property, but up to a certain time limit. They will assess whatever the market avails for the price and the number of bidders out there. They are in the business of financial lending, not property management and real estate sales, so they will try to sell in the most expedient time possible. They know that every month the property doesn't sell, they are losing money because there is no rental income (U.S. banks do not want to become property managers so they will not rent out the property). This is how investors here in the U.S. can sometimes negotiate very good deals with the banks on foreclosed properties (especially in a slow market).

One of the ways U.S. banks decrease their risk is by looking at a borrower's credit score. We have a good accountable credit system here. There are 3 private (non-government) credit bureaus that monitor the credit payment history of all borrowers and rate individuals by a scoring system. The 3 bureaus are private companies but regulated by Federal consumer protection laws. Each bureau gives a score to an individual with their own proprietory software calculation system. The 3 scores (from each company) gives a "check and balance system" so that no one score is biased against a person's credit history. The banks usually take the median score (the middle score, excluding the highest and lowest score) into consideration for home loan applications.

How do Philippine banks deal with this? Anyone have any experience on this topic?

[Dvorak]

China Bank and Banco De Oro gave me a quote of 8.75% p.a. interest for 5 years.

[sugarboy]

wow. ok yun a!

[Bo B]

Originally Posted by sugarboy

i heard from a friend that BDO is really flexing its muscles as the number 2 bank offering super low rates.

however, here are some figures from Metrobank....
(got this yesterday as i was eyeing something on the market)

LOAN AMOUNT: P 1.5million
fixed rate for 10 years : 10.99%pa
monthly ammortization : 20,654.01

LOAN AMOUNT: P 1.5million
fixed rate for 5 years : 9.75%pa
monthly ammortization : 31,666.37

LOAN AMOUNT: P 2million
fixed rate for 10 years : 10.99%pa
monthly ammortization : 27,538.68

LOAN AMOUNT: P 2million
fixed rate for 5 years : 9.75%pa
monthly ammortization : 42,248.49

Got the same rate for BPI... It could change though.

[Bo B]

Originally Posted by sugarboy

i heard from a friend that BDO is really flexing its muscles as the number 2 bank offering super low rates.

however, here are some figures from Metrobank....
(got this yesterday as i was eyeing something on the market)

LOAN AMOUNT: P 1.5million
fixed rate for 10 years : 10.99%pa
monthly ammortization : 20,654.01

LOAN AMOUNT: P 1.5million
fixed rate for 5 years : 9.75%pa
monthly ammortization : 31,666.37

LOAN AMOUNT: P 2million
fixed rate for 10 years : 10.99%pa
monthly ammortization : 27,538.68

LOAN AMOUNT: P 2million
fixed rate for 5 years : 9.75%pa
monthly ammortization : 42,248.49

Got the same rate with BPI... It could change though.

[Rene Ybardolaza]

Originally Posted by jgacis

I also heard in the news that the World Bank has praised the Philippines for its improved fiscal position, but wants the country to show sustainability and further reform of it's fiscal policies. They mentioned that Philippine banks need to show more liquidity in their foreclosed and repossessed properties. I don't know why they mention that, maybe because the banks want top dollar for their properties? Or maybe because the bidding process for repossessed properties are too complicated (or the process too lengthy) for most people. Hence, maybe the stock inventory of repossessed properties from banks continue to increase on an annual basis, which is not a good economic indicator. Any more insight on this?

John, A little over ten years ago when I was working with The World Bank, we did an analysis of the real estate market and lending practices in the Philippines. At that time, the economy was doing well under the Ramos presidency, and the real estate market was appreciating fast. Given that rosy scenario, government agencies that were lending and providing guarantees had large portfolios of non-performing loans. The foreclosure process then (I don’t know the current practices) was very cumbersome. The system allows the foreclosed borrower one year of redemption period – a loooong amount of time for a non-performing loan to sit idle in one’s books. When I shared with a developer how the U.S. lenders do their foreclosure process, where the property is acquired by the bank in less than 120 days, the comment to me was, “masyadong malupit kayo.” On the personal side, my wife’s uncle, who was a councilman at the time, had been delinquent with his loan for over three years, and no one from the bank has sent him a notice of default. Obviously, there was inefficiency in the system.

Another difference we noted is the way Philippine banks look at non-performing loans in their portfolio. In the U.S., the bank’s objective is to get rid of non-performing asset as quickly as possible by giving it a haircut, sometimes selling assets 50 cents to a dollar, if necessary. Thus, the need for more reserves. The Philippine counterpart is not so willing to realize that loss in the balance sheet. There is cultural belief that property value cannot go below the original value when the loan was created. This is similar thinking in Japan. So instead of getting non-performing assets off their books, they wait for the value to rise – per market demand.

Another cultural difference is the way loans are underwritten. The U.S. lending practices is probably 25 years ahead of the Philippines, where loans are bundled, sliced and diced into securities (Mortgage-Backed Securities) for investors with different appetites for risk. This means loans must be originated with uniform documentation, standard underwriting practices, etc. In the Philippines, we found multi-million peso loans originated with no documentation – all done with a handshake. In a country where your face is more important than your signature, the handshake will do just fine. After the break-up of the Soviet Union, a lot of Americans went in to invest and lost their shirts because they lacked understanding of this cultural difference. The American placed a higher trust to the value of the pen, instead of the value of the person using the pen. Unfortunately, loans originated with a handshake do not have value if the lender wants to sell it to the secondary market.

In summary, what works for one country will not always work for the other. We just need to understand the differences and find commonalities that will allow us to work together efficiently.

[jgacis]

Wow, thanks for that very useful information and insight! Yes, its true, we do need to know our cultural differences and learn from that. Thanks again for that bit of education to me (and hopefully to many others) on that subject.

I do hope that the banks there in the Philippines will still continue to develop and learn to trust more on the pen than just a pretty smile!

[sugarboy]

Thanks for the enlightening post Rene. Especially on the item re foreclosure and redemption. I agree with the sentiment na malupit ang banker to act on a property within 120 days but then, business is business. Which is why in my personal experience, when I was also hit by the Asian Financial crisis, I made sure that I'd be able to buy back whatever was foreclosed within 120 days even though 365 days was the provision.

I feel that given the long period of time it takes before a property/collateral gets foreclosed here in the Philippines, the businessman should have had arrived at some back-up plan to avert the inevitable. Without trying to sound too condescending, woe to the businessman who can't come up with a contingency given the ample amount of time allowed to salvage the property taken in as collateral.

[Rene Ybardolaza]

Yes, lending can be a dirty business at times. It’s a balancing act, dealing with the borrower who is having a hard time paying back a loan. On the opposite end, the lender has to protect the assets entrusted upon him by investors.

There is a double standard when doing a workout with a borrower who defaults on his loan. There is leniency towards the homeowner versus the commercial borrower. The logic being - mom and pop is not savvy financially when compared to the commercial borrower who should be a big boy and show responsibility by dealing with the situation like a business.

[kalabaw]

Originally Posted by kevinb

Is it true that BDO Unibank will buy BPI?

Hindi siguro. BPI is one of the largest banks. Sabi nga sa opening post, number 2 sila... just behind MBTC. And I don't think the Ayala's would do that. It's their financial service arm.

But kung may ganyan ngang news, super mega bank na ang kalalabasan niyan -- EPCI, BDO and BPI rolled into one. Yun nga lang, anong itatawag sa bagong bangko? Kung ako, I will still go with BPI... may historical value eh. =) Pero sabi ko nga, malabo yang mangyari...

[jgacis]

Originally Posted by Rene Ybardolaza

There is a double standard when doing a workout with a borrower who defaults on his loan. There is leniency towards the homeowner versus the commercial borrower. The logic being - mom and pop is not savvy financially when compared to the commercial borrower who should be a big boy and show responsibility by dealing with the situation like a business.

That's correct because I read about that too in an article once. It stated that in order for the Philippine economy to grow, it needed to reform its commercial lending practices to more favorable terms. Especially for start-up entrepreneurs, who are looked at as the frontiersmen in leading the growth for the economy.