PDIC bails out PBCom for P7.64-B

The Philippine Deposit Insurance Corp. (PDIC) is bailing out Philippine Bank of Communications (PBCom) with a capital infusion of P7.64 billion and in the process appointing four directors and a consultant into the board to oversee the bank’s rehabilitation.

PBCom ran into trouble last year after it suffered from massive withdrawals on news reports that it was applying for an emergency loan with the Bangko Sentral ng Pilipinas (BSP).

The bank, however, was immediately rescued by beer and tobacco tycoon Lucio Tan, who infused a still undetermined amount into PBCom to help out his close friend and in-law, who owned part of the bank.

But according to a government source, PBCom was never in trouble except for the in-fighting at the board of directors that led to leaks in various newspapers (not The Star), reporting that the bank was being urged to seek assistance from the BSP.

The agreement between PBCom and PDIC was officially signed yesterday which also ushered in PDIC’s nominees into the board led by Rene Peronilla, a former executive vice-president of the defunct PCI Bank and the former CEO of Traders Royal Bank; Carmen de Venecia-Lim, another former PCI Bank official and current PDIC director; Ruben Almendras, the former senior vice-president of the Rizal Commercial Banking Corp., and Jay Antonio Quila, formerly of the Asian Development Bank.

The four PDIC directors will be joined by former Capital Markets Development Committee chairman Roman Azanza, who will serve as the bank’s consultant.

PDIC president Ricardo Tan told reporters that under the bail-out scheme, PDIC had agreed to grant PBCom P7.64 billion in "financial assistance" over a 10-year period to buy government securities that would be pledged as collateral for the loan.

"The assistance will provide income support to the bank to cover projected losses of 85 percent from the sale (of bad assets)," Tan said.

In return, the major shareholders of the bank committed to infuse P3 billion in capital as well as to sell P10 billion worth of bad assets that have been eyed under the Special Purpose Vehicle Act (SPVA).

PBCom’s major shareholders consist of the Luy, Chung, and Nubla families.

After the infusion, PBCom is then expected to develop the rehabilitation plan as it prepares for its Tier 1 capital buildup to increase its capital adequacy ratio.

PBCom president and CEO Isidro Alcantara said the PDIC loan is expected to help the bank regain its footing after a sharp drop in income last year to only about P80 million, from P246 million the previous year.

"With the clean up (of bad assets), we expect to earn up to P800 million this year," he said. "After that, we expect to earn over P1 billion by 2006."

PDIC’s bailout, Alcantara said, would improve PBCom’s capital adequacy ratio from 13 percent to 22 percent.