Allied Bank-PNB merger to come about in 6 to 9 months, says exec

LUCIO Tan-controlled Philippine National Bank (PNB) and Allied Banking Corp. may be able to fully merge their operations within the next six to nine months, according to PNB president and chief executive officer Omar Byron Mier.

The merger was supposed to have been completed by the middle of this year but was delayed because of the need to comply with US banking regulations requiring Allied Bank to divest its 28-percent equity share in California-based Oceanic Bank prior to merger.

In an interview with reporters on Friday night, Mier said two investment banks—which he declined to identify—were recently hired to speed up the sale of the shares in Oceanic.

“[The investment banks] are talking to prospective investors and there’s interest coming from some funds in South America, Europe and the US,” he said. “So the merger will happen in the next six to nine months.”

PNB, the surviving entity in the merger, is hoping to become the fourth-largest domestic bank in terms of assets, deposits and loans after swallowing Allied Bank. As of end-March, it was No. 5—behind Banco de Oro Unibank, Metropolitan Bank & Trust Co., Bank of the Philippine Islands and state-owned Land Bank of the Philippines—in assets.

The two banks had a combined asset base of P456 billion as of end-March, bigger than fourth placer LandBank’s’ P427 billion.

PNB ranked sixth-biggest in deposits and was No. 9 in net loans and receivables as of end-March.

The merger was originally expected to be completed by the end of 2008 but had to be pushed back because of the regulatory issue.

Allied Bank initially thought it would need not more than six months to complete the sale of its shares in the $30-million US bank. But selling at a premium in a recessionary environment proved to be difficult.

“That’s the only thing holding back the legal merger of Allied Bank and PNB,” Mier said. “We will not sell at a loss. Definitely we have to sell at a premium and there is interest because [Oceanic] is a profitable bank.”

Despite the merger delay, the two banks have started synchronizing their information-technology systems and aligning products, policies and procedures.

They are also preparing to expand into China. On Friday the two banks separately disclosed to the stock exchange the approval of the China Banking Regulatory Commission on the equity investment they were to make in Allied Commercial Bank (ACB) based in Xiamen.

Mier said PNB and Allied Bank will invest $88 million in ACB to jump-start the expansion in China. PNB will have a 41-percent stake in ACB and Allied will have 50 percent, while certain individuals will own the remaining 9 percent, he said.

In their disclosures on Friday, PNB said it would invest 394.1 million yuan in ACB while Allied Bank said it would put in an additional 153.98 million yuan and convert its share of 42.9 million yuan in undivided profits in ACB into equity.

Mier, however, said the expansion in China will only begin when ACB, which has a branch in Chonquing, meets the minimum required net worth of 1 billion yuan.