Merger with Urban Bank makes EIB one of RP’s top KBs

The merger documents of the Export and Industry Bank and the closed Urban Bank were presented Friday to President Arroyo, signaling the latter’s rehabilitation and reopening to the public.

The merger was described by the Chief Executive as the first successful rehabilitation of a bank in the Philippines since an Asia-wide financial meltdown battered the banking sector in the region in mid-1997.

The ceremony was timed to coincide with the conclusion of a conference to find ways of accelerating the revival of the country’s capital market.

Export and Industry Bank (EIB) will be the surviving entity eventually although it will initially adopt the name of Urban Bank which is a public corporation listed in the Philippine Stock Exchange. The merger combined the resources of the two banks amounting to P29 billion.

The surviving bank will serve the credit and savings needs of depositors in 22 branches of the old EIB and another 30 branches of Urban.

The increased resources will upgrade the status of EIB from a specialty bank focused on granting credit to exporters into one of the top commercial banks (KBs) in the country.

Signatories to the merger agreement besides top officials of EIB and Urban Bank were the Philippine Deposit and Insurance Corp. (PDIC) and the National Association of Urban Bank and UrbanCorp Investment Depositors and Creditors. NAUD which was led by some of the blue chip corporations in the Philippines was ExportBank’s main partner in its Urban Bank rehabilitation bid.

Salient features of the agreement include the conversion of 10 percent of the deposits of and preferred shares of investors and depositors on the date of Urban Bank’s closure into common shares of the merged bank; a plan to systematically service all liabilities of Urban Bank to its depositors and creditors including the redemption of preferred shares not converted into equity; a rehabilitation plan for both the Urban Bank and UrbanCorp.; its investment banking arm; a liquidity support by the government amounting to P1.7 billion; and availment of incentives by the merged bank under BSP rules and regulations.

A press statement issued by the merged bank announced that in addition to its role as the front liner in trade financing, the new EIB will likewise focus on one of the government’s priority programs, that of extending credit to housing projects.

Urban Bank was ordered closed by the Bangko Sentral ng Pilipinas on April 25, 2000 after it suffered a serious liquidity problem. It was later offered for rehabilitation but only the EIB-NAUD consortium offered to take over the troubled bank.

It was announced that when the doors of the rehabilitated bank will open starting Monday, the new investors assured that it has sufficient funds to cover anticipated withdrawals by depositors whose cash were frozen since Urban Bank got closed.

EIB chairman Sergio R. Ortiz-Luis, Jr., appealed to small depositors to follow the example of the big depositors which converted chunks of their frozen deposits into equity and maintained their bank accounts under the merged entity.

In the event that the merged bank’s cash would not be sufficient, PDIC and the BSP have committed to provide the rehabilitated bank with substantial liquidity assistance facility.