Another bidder for Equitable PCI?

Following on from yesterdayÆs report, a new bidder may be readying to enter the ring to buy 65% of Equitable PCI in the Philippines.

That bidder is strongly rumoured to be a consortium of AIG and Newbridge Capital. AIG was contacted, but said it couldn’t issue a statement, and Newbridge couldn’t be reached for comment.

Both institutions would make sense. AIG is headed in the Philippines by Joseph Cuisa, who was not only the former chairman of Far East Bank, but is a former central bank governor. Meanwhile, Newbridge has already made a significant bank purchase of Korea First Bank and views banking as one of its specialties. The other contenders are BPI and Metrobank. If either of these merged with Equitable PCI they would create a megabank with a 25% market share.

Equitable PCI is being sold by George Go and two government-related entities - the reason being that it has suffered large withdrawals due to its association with the Estrada impeachment trial (see related article). A new controlling shareholder would restore confidence in the bank.

AIG and Newbridge would be potentially the least political bidder – should the rumour prove true. BPI is controlled by the Ayala family, and it might be sensitive for it to gain such a commanding share of the banking industry. And Metrobank’s George Ty is a close associate of President Estrada.

AIG has been looking at the Philippine banking scene for a while. AIG’s CIO Edward Grau admitted to FinanceAsia last year that it was interested in buying into a local bank. A new banking act passed last summer permitted foreigners to buy 100% of a local bank. Thus far, only HSBC has taken advantage of the new law, buying PCI Savings Bank for $22 million.

Equitable PCI is a bit bigger. It has a market capitalization of around $800 million and trades at a price to book ratio of around 1.3. Philippine banks have some of the best returns on equity of any banks in Asia, but at the moment they are trading at near historical lows thanks to the Philippines’ political problems.

If a financial investor was to take a five-year view, Equitable PCI might be a good investment in these circumstances. And AIG is no stranger to Philippine bank stocks. It buys them as a proxy for long-term bonds - of which there are few in the Philippines. From an operational perspective, AIG would find the acquisition easy to manage.

Edilberto Zosa, a senior vice-president of Equitable PCI was a Wharton classmate of AIG’s Cuisa and his CIO Grau.

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