China Bank to merge with Manilabank

REPORT FROM BUSINESSWORLD Sy-led China Banking Corp. (China Bank) will merge with Puyat-led Manilabanking Corp. (Manilabank) for a purchase price that will be concluded after a 30-day due diligence. China Bank, a listed universal bank, has agreed to buy 87.51% of the subscribed shares of Manilabank, a thrift bank. In a statement, Manilabank Chairman Luis Puyat said the rapidly changing landscape of the Philippine banking industry has made it tougher for smaller banks to compete. The deal is yet to be approved by the Monetary Board and the Securities and Exchange Commission. "It was a difficult decision for the family to let go of a business we have painstakingly built over the years. In looking for a partner, we were attracted by China Bank’s capital strength, financial stability, loyal customers and sustained profitability. We are gratified that Manilabank will become a crucial part of China Bank’s plans to become a strong major player in the industry," he said. Reopened as a savings bank in June 1999, Manilabank’s total assets stood at P10.2 billion, loans at P4.4 billion and deposits at P5.2 billion as of December 2006. The merger will expand China Bank’s network of 155 branches by another 75 branches from Manilabank, on top of the ongoing three-year branch expansion program of China Bank. Of the 75 Manilabank branch licenses, 41 are for Metro Manila and 34 are for provincial areas. However, only 27 are operating. China Bank’s net income of P3.54 billion last year represented a return on stockholders’ equity of 15.93% and a return on assets of 2.47%. Its capital adequacy ratio of 28.35%, adjusted for credit risk, continues to be among the highest in the industry. It said this places the bank in a position to pursue its three-year plan of accelerated loan growth and branch network expansion and comply with Basel 2, while providing satisfactory returns to shareholders through cash and stock dividends. Peter S. Dee, China Bank president and chief executive officer, said the bank’s three-year business plan calls for an aggressive expansion of its distribution network, together with substantial growth in assets and loan portfolio. "This acquisition will boost our branch network substantially to over 250 branches, including the expansion program we already started even before this deal," he said. "With a bigger footprint and network through which we can sell and distribute our full range of products and services, we are now in a better position to compete more effectively with the bigger competitors in the banking industry," he added. "We consider this deal a strong recognition of the inherent strengths of China Bank and the strong future that this combination of resources would mean for our combined client base," China Bank Vice Chairman Hans T. Sy said in a statement. On Thursday China Bank shares closed 1.1% higher at P915. — Ruby Anne M. Rubio/BusinessWorld