CIMB buys into Philippines’ Bank of Commerce

CIMB Group Holdings Bhd yesterday inked a deal to buy just under 60 per cent of the Philippines’ Bank of Commerce (BOC) for 12.2 billion pesos (RM881 million) in cash, a move analysts said gives it early mover advantage in a market with high-growth banking potential.

The Philippines is Asean’s fifth largest economy and the second largest by population, but it is one of the most under-penetrated banking markets in the region, making it an attractive
market for foreign banks looking for growth.

“There’s been a resurgence of interest in the Philippines of late, so it’s good that CIMB gets in early,” said an analyst from a foreign brokerage house, who deemed the price “fair”.

The deal values BOC at a price to book of 1.14 times, but this will effectively rise to 1.3 times once the bank is fully alligned with CIMB Group’s accounting and provisioning policies.

CIMB Group, Malaysia’s second largest banking group, also confirmed that it has started talks with Royal Bank of Scotland
(RBS) to buy the latter’s 50 per cent equity interest in RBS Morgans, one of Australia’s largest brokerage firms.

CIMB had earlier last month bought some of RBS’ assets in the Asia Pacific for RM849.4 million, but the Brisbane-based brokerage with some 200 branches had been excluded from that deal.

“We’ve always indicated interest in RBS Morgans ... but at that point in time, we were not ready to complete negotiations,” CIMB
group chief executive Datuk Seri Nazir Razak told reporters here yesterday, adding that buying it now would be the “logical” thing to do.

It is not known if CIMB is in exclusive talks with RBS over the stake.

CIMB Group's banking unit, CIMB Bank, is buying a 59.98 per cent stake in BOC from Philippine conglomerate San Miguel group. Foreign ownership of banks there is capped at 60 per cent.

Following the deal, expected to be completed in late August, San Miguel's unit - San Miguel Corp Retirement Plan (SMC) - will remain the largest minority shareholder in BOC with a 27 per cent stake.

CIMB Bank also entered into a collaboration agreement with SMC that will see CIMB becoming the preferred banking services provider for the SMC group as well as its suppliers and partners.

"As an Asean universal bank, this extension to the Philippines is a very natural one. I believe we are entering the market at the right time, with the right deal and right partner," Nazir remarked.

He was optimistic about riding on the long-term prospects of the country's economy, pointing out that its average annual growth rate has been about 4.9 per cent in the last ten years.

The purchase will have a neutral impact on CIMB's earnings this year but is expected to be earnings-accretive from 2013 onwards, he said.

The group's target is for BOC, which is currently the 16th largest commercial bank by assets in the Philippines with 122 branches, to be ranked among the top ten in two years.

"BOC is small today but it can grow quickly with its low loan-to-deposit base and high capital ratios," Nazir said, adding that the group had no plans to list BOC.

BOC's key focuses will be wholesale banking, mass affluent retail and remittance business.

With BOC now in its bag, CIMB Group is now present in all Asean countries except Laos. Nazir said the group would within this quarter apply for a banking licence in Laos via its Thai unit, CIMB Thai Bank plc.

By Adeline Paul Raj, btimes.com.my