BSP approves merger of East West, AIG Philam Savings

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has conditionally approved the merger between the Gotianum-led East West Banking Corp. and the AIG-Philam Savings Bank.

BSP Governor Amando M. Tetangco Jr. confirmed yesterday that the Monetary Board has given its conditional approval for the merger, pending the submission of documents required by the central bank.

AIG-Philam Savings Bank is a subsidiary of Philippine-American Life and General Insurance Co. (Philamlife) and the merger would make East West Bank the sixth largest credit card issuer in the country.

East West Bank president Antonio Moncupa told reporters that the conditional approval paved the way for the integration of the two institutions and said the merger is targeted to be completed within the next three to four months.

Moncupa said the acquisition the AIG-Philam Savings Bank would expand East West Bank’s retail banking business and allow it to corner a significantly larger share of the credit card and auto loan market.

“The acquisition will expand our retail footprint, give us better economies of scale and strengthen our service delivery capabilities to the broad middle market segments that include business enterprises and companies,” Moncupa said.

The merger is expected to boost the assets of East West Bank to P63 billion from P49.924 billion as of 2008 and expand its credit card business from its current credit card receivables of at least P3.7 billion.

To bankroll the transaction, EastWest Bank planned to issue Tier 1 capital worth P2 billion but Moncupa said the bank would keep its capital adequacy ratio (CAR) at 14 percent despite the cost of the merger.

“In the next few years, we will continue to build our franchise, focusing on lending to mid size businesses, enlarging transactional deposit base, expanding our credit card, auto loans, and mortgage footprints, and building our fixed income investor base,” he said.

Last year, East West Banking Corp. completed the issuance of Tier 2 capital notes worth P1.25 billion that it used to support its capital expansion program that included merger possibilities.

at an effective rate of 8.625 percent.

The issue increased the bank’s capital adequacy ratio (CAR) from 14 percent to 18 percent, significantly above the BSP’s minimum of 10 percent.

Moncupa said the market positively responded to the issue, which was closed shortly after the government floated its retail treasury bonds (RTBs) that solicited some P77 billion in total sale.

East West Bank is ranked 19th among local commercial banks in terms of assets, capital and deposits. In terms of loans it ranked 17th and 27th in terms of return on equity (ROE).