MAKATI CITY Philippines — All it took was less than 30 minutes to create the Philippines’ second largest bank as shareholders of the SM Group’s Banco de Oro and Equitable PCI Bank overwhelmingly endorsed the merger of the two financial institutions on Dec. 27.

Banco de Oro the Philippines’ fifth largest lender will be the surviving entity in the merged unit to be called Banco de Oro-Equitable PCI Bank. Teresita Sy-Coson the eldest daughter of Henry Sy Sr. chairman of the board for SM Prime Holdings Inc. and owner of the Agana Shopping Center Inc.; will chair the merged bank. Nestor Tan president of Banco de Oro; will also be the president of the merged entity. Rene Buenaventura president of Equitable PCI Bank; was supposed to be named vice chairman of the merged bank but has already tendered his resignation.

In a 20-minute special stockholders’ meeting at the Makati Shangri-La Hotel Banco de Oro owners also approved the increase in the bank’s authorized capital stock to 65 billion pesos ($1.33 billion) from 15 billion pesos ($306 million) to allow it to issue additional common shares needed for the share swap with Equitable PCI Bank to effect the merger. Under the merger plan Equitable PCI Bank shareholders will receive 1.8 Banco de Oro shares for every Equitable PCI Bank share.

In the afternoon at the Santiago Hall of the Equitable PCI Bank Tower I also in Makati City Equitable PCI Bank shareholders also approved the merger in just seven minutes in a separate stockholders’ meeting. The deal has been valued at 60 billion pesos ($1.22 billion) based on Equitable PCI Bank’s closing price at the stock market on Dec. 27. Equitable PCI Bank is  the third largest lender in the country.

"There were no objections to the merger plan; that is why it was approved by the shareholders " Corazon dela Paz president of the Social Security System and concurrent chair of Equitable PCI Bank; said. Despite a pending case before the Supreme Court halting the sale of the Social Security System’s 26%-stake in Equitable PCI Bank to the SM Group the Department of Justice issued an opinion on Dec. 27 stating that the pension fund could vote their shares in the Equitable PCI Bank during the special stockholders’ meeting. Close to 95% of the shareholders of Equitable PCI Bank attended the meeting.

Coson who is also vice chair of Equitable PCI Bank and SM Investments Corp. the holding firm of the SM Group; said "It has been in the works for the last three years. We’re just happy that we have this opportunity that comes with a lot of tribulations." She said "We will preserve the business the organization the people and we will likely expand the business from that point."


On being the second largest Philippine bank in terms of assets Coson said "There was no intention at all to become the biggest lender here. We needed to expand at that time and we saw the opportunity to grow. If we can be the most efficient institution that’s more important to us than being number one."

She said she wanted the merged entity to keep its market-lead in its core business such as corporate and middle-market banking consumer banking credit cards assets management remittances leasing and finance. Equitable Credit Card Inc. a unit of Equitable PCI Bank links MasterCard and Visa credit card issuers in the Philippines and oversees the profitable remittance operations of the bank.

The Bangko Sentral ng Pilipinas the Philippines’ equivalent of the Federal Reserve and the Securities and Exchange Commission are expected to give their respective stamps of approval to the merger.

Amando Tetangco Jr. governor of Banko Sentral ng Pilipinas; told the Journal that the central bank "encourages mergers to achieve better scale of economies and further strengthen the banking system. This will lead to enhanced confidence and improved banking services to the public."

Meanwhile Banco de Oro said it sees a reduction in its income next year due to anticipated integration costs from the merger with Equitable PCI Bank. According to Nestor Tan president of Banco de Oro; "We are seeing a reduction in our net income temporarily because we need to spend money for the network system manpower and civil works." The bank was estimated to have earned 3.1 billion pesos ($63.3 million) at the end of 2006 up 20% from its 2.5-billion-peso ($51 million) profit in 2005.

He said the complete integration of both banks’ systems and operations is expected to take two years.

Both listed at the Philippine Stock Exchange Banco de Oro shares closed at 46 pesos ($0.94) on Dec. 27 2.13% off its price the previous day while Equitable PCI Bank shares closed 0.6% higher at 84.50 pesos ($1.72) apiece. MBJ