Philippine foray still tempting for CIMB

PUBLISHED : Monday, 23 September, 2013, 12:00am
UPDATED : Monday, 23 September, 2013, 4:17am

Malaysia's CIMB Group, the country's second-largest lender by assets, may be able to revive its attempted entry into Asia's fastest-growing banking market by targeting Philippine National Bank (PNB).

CIMB scrapped a takeover of Manila-based Bank of Commerce in June after disagreeing on terms with the sellers. With a market value of US$18 billion, CIMB said last month it was still seeking assets in the Philippines, where bank profits grew faster in the past five years than anywhere else in Asia.

PNB, the fourth-largest bank in the Philippines based on its US$2 billion market value, is the most likely target after its own merger talks with a local rival failed last year.

Charles Ang, an analyst at COL Financial Group in Pasig City, the Philippines, said the country's banking industry "is in its infancy, so the potential is quite big".

From its 1924 roots as a financier to businesses on the island of Borneo, CIMB has completed 23 takeovers worth a combined US$4.3 billion in the past decade. The Kuala Lumpur-based bank's network, which stretches from the United States to Australia, now includes 13 Asian nations, according to its website.

In June, CIMB dropped its plans to buy 60 per cent - the maximum permitted for overseas banks under Philippine law - of Bank of Commerce from San Miguel and others for about US$280 million. "Land issues" undermined the deal, San Miguel president Ramon Ang said at the time.

CIMB chief executive Nazir Razak said three weeks ago he still wanted a business in the Philippines.

In the past five years, banks in the Philippines valued at more than US$1 billion notched up average annual earnings-per-share growth of 35 per cent, beating the average in other Asian countries.

Lending by Philippine banks will jump 20 per cent this year, 16 per cent next year and 15 per cent in 2015 as rural branches tap population growth outside cities, Gilbert Lopez, a Macquarie analyst, wrote in a report last month.

PNB has about 650 branches in the Philippines.

"They're the best target," ND Fernandez, a Pasig City-based analyst at Wealth Securities, said. "That would give an acquirer a really strong foothold in the Philippine banking market."

Merger talks between PNB, which is backed by billionaire Lucio Tan, and Bank of the Philippine Islands, the country's largest lender by market value, collapsed in December. PNB merged with Allied Banking, another bank in which Tan was invested, in February.

"The sign is still on that it's for sale," said Katherine Tan, an analyst at Maybank in Makati City, the Philippines. In a report she said PNB was "ripe for the picking" after a stock price decline.

PNB shares have fallen 31 per cent since reaching a 13-year high on May 6, leaving the bank trading at just 1.1 times book value. That is lower than all its publicly traded local peers, which are valued at an average multiple of 1.8.

Raul Ruiz, an analyst at RCBC Securities, said PNB-owner Tan had indicated he would only sell the bank for 1.8 to two times its book value.