SEC okays UnionBank, iBank merger

The Securities and Exchange Commission (SEC) has approved the merger of the Aboitiz-controlled Union Bank of the Philippines and International Exchange Bank (iBank).

In a disclosure to the Philippine Stock Exchange (PSE), UnionBank said it was issued a certificate of filing of the articles and plan of merger of UnionBank and iBank.

On June 5, 2006, UnionBank purchased 98.8 percent of iBank shares through a special block sale coursed through the PSE. The shares were sold at P42.50 each.

The merger with iBank is expected to create the industry’s seventh biggest private universal bank with assets of around P170 billion. The combined branch network of 199 will make it the sixth largest in the industry. iBank presently ranks 17th among the country’s biggest banks with assets of about P60 billion.

iBank operates 77 branches while UnionBank has 122 branches. Of the 77 iBank branches, 42 are in Metro Manila out of which 33 are redundant or are located near a UnionBank branch. Once the merger is complete, there will be a total of 186 UnionBank branches nationwide, making it the seventh largest private universal bank in branch network and asset size, as well as the eighth largest in deposits.

UnionBank is aiming to become one of the country’s top three players in the banking industry which is presently dominated by Metropolitan Bank & Trust Co. In order to achieve its goal, UnionBank Would need to have a resource base of between P300 billion to P400 billion.

UnionBank posted a net income of P1.1 billion in the first half of the year compared with P1.5 billion in the same period last year. The lower bottom line was attributed to the interim impact of expenses related to the purchase of iBank.

Weaker margins as domestic interest rates fell also accounted for the decline in earnings. Consumer finance, cash management, and capital markets businesses remained consistent contributors of income.

A total of P140 million in loan loss reserves was provided by iBank during the period, bringing non-performing loans cover to 83 percent versus the industry’s 78 percent. Efficiency and profitability ratios remained well above industry averages. Return on average equity was 12 percent and return on average assets was two percent during the first half of the year.

Total resources rose to P108 billion in June 2006 from P105 billion in the same period last year. The bank’s aggressive marketing strategy paid off with low-cost deposits rising by close to P1 billion during the reference period. Capital base expanded to P17.6 billion, bringing capital-to-risk assets ratio to 36 percent.