Thursday, 20 June 2024

Merger with Robinsons Bank signals BPI’s acceleration of digital banking capabilities

5 min read

By Kevin Luarca

The merger is a big step for BPI’s digital banking ambitions, with Robinsons Bank’s 20% stake in GoTyme being able to significantly accelerate growth

In a landmark development for the Philippine banking sector, the merger between the Bank of the Philippine Islands (BPI) and Robinsons Bank Corporation (RBC) has been approved by the Bangko Sentral ng Pilipinas (BSP). The regulatory green light strengthens BPI’s position as one of the largest banks in the country.

The Monetary Board of BSP granted approval on 15 December 2023. The target completion date is set for early 2024, contingent upon clearance from the Securities and Exchange Commission, reflecting the comprehensive regulatory oversight that accompanies such strategic moves.

According to the official notice released by BSP: "The constituent banks secured the clearance of the Philippine Competition Commission on the merger on 9 March 2023, and the approval of the Monetary Board in its resolution dated 14 December 2023 as reflected in the letter of the Bangko Sentral ng Pilipinas (BSP) dated 15 December 2023.”

BPI will release approximately 314 million new BPI common shares to shareholders of Robinsons Retail Holdings and parent company JG Summit Capital Services Corporation. In return, it will assimilate the net assets of RBC. This exchange of stakes reflects a strategic maneuver to facilitate the merger and create a strengthened financial entity.

As of 30 June 2023 according to BSP, BPI is the third largest bank in the country with a total asset size of PHP 2.6 trillion ($46.92 billion). RBC on the other hand is the 16th largest with total assets amounting to PHP 186 billion ($3.36 billion). Post-merger, BPI will retain its position as the third largest bank in the country with an estimated combined total asset of PHP 2.786 trillion ($50.28 billion). The largest bank in the country is still BDO with PHP 3.97 trillion ($71.64 billion) in total assets, followed by state-run Landbank which recorded PHP 3.02 trillion ($54.5 billion).

The Philippine Competition Commission (PCC) reiterates: “Post-transaction, BPI, as the surviving entity, will merely retain its current position as one of the largest players in the identified relevant markets…the presence of the remaining market players, including bigger banks, pose sufficient competitive pressure on the surviving entity.”

Aside from BPI and RBC, two state banks in the country also proposed a mega-merger earlier this year – Landbank, the second largest bank in the country by assets, and the Development Bank of the Philippines (DBP), which is the ninth largest bank in the country, with a total asset amounting to PHP 962.86 billion ($17.37 billion). Landbank and DBP will have an estimated PHP 3.982 trillion ($71.81 billion) in combined assets, which will make it the new largest bank in the country, surpassing BDO. The proposed merger is expected to be completed during the first half of 2024

The two banks are also involved in the funding of a sovereign fund. The Philippine House of Representatives proposed the creation of a sovereign wealth fund to be known as the Maharlika Wealth Fund. Maharlika Investment Corporation will manage the sovereign fund after details have been smoothened. Together, the two banks have contributed PHP 75 billion ($1.34 billion) to set up the fund. However, the considerable contributions from these banks have prompted concerns regarding their ability to maintain compliance with the capital adequacy ratio of 16.4% set by the BSP. However, BSP has indicated that it will allow temporary relief from the requirement. Governor Eli Remolona Jr  said on 11 October: “In principle, we can provide forbearance, which means we can allow them not to comply for a period of time. This is in principle. This is what’s done elsewhere. But they will be expected to comply at some point.”

Eli Remolona Jr., Governor, Bangko Sentral ng Pilipinas

No new developments have been announced by the BSP over the planned merger of the Landbank and DBP.

A collaboration between mega conglomerates

The merger of BPI and RBC also marks the collaboration between two of the largest conglomerates in the country. Ayala Group, the largest conglomerate in the country with a market capitalisation of PHP 448 billion ($ 8.07 billion), owns BPI. Meanwhile, Robinsons Bank, belongs to the Gokongwei Group which is publicly listed as JG Summit Holdings with a market capitalisation of PHP 316 billion ($ 5.7 billion).

Ayala Group has investments in various sectors such as real estate, telecommunications, energy, and healthcare. Its subsidiaries include telecom giant Globe, and the country’s only double unicorn GCash, which is operated by a joint venture between Alibaba’s Ant Group, Ayala Corporation and Globe Telecom. Ayala Group is also the parent company of AC Industrials which operates Integrated Microelectronics (IMI), a global industrial technology manufacturing services provider particularly in electronics (EMS), as well as power semiconductor assembly and test services. IMI is among the top 20 EMS providers globally by revenues and is fifth in the world by the same measure in terms of automotive.

On the other hand, JG Summit is engaged in diverse industries including food and beverage, airlines, and petrochemicals. It owns Go Tyme Bank, a Philippine digital bank with Tyme Group, headquartered in Singapore. It also has stake in the Philippine’s largest telecom, PLDT, and a low-cost airline, Cebu Pacific.

Jose Teodoro Limcaoco, president and CEO at BPI said: “We are excited about this transaction and believe that this Merger exemplifies BPI’s strategic effort to expand its client base, accelerate growth, and ultimately increase shareholder value through partnerships with the Gokongwei Group,”

Jose Teodoro Limcaoco, President and CEO, BPI

By collaborating with the Gokongwei Group, BPI can broaden its customer outreach, expedite its growth, and ultimately enhance shareholder value.

“We are also keen on strengthening our ties with the Gokongwei Group even more through various collaboration opportunities across the Gokongwei Group’s vast ecosystem,” Limcaoco added; however currently, it is still unknown how the merger will affect other sectors of the Gokongwei Group's business interests.

Lance Gokongwei, president and CEO at JG Summit said: "We reviewed our strategic options to determine its future and we are cognisant that banking is a scale game and will continue to require additional capital for growth."

Lance Gokongwei, President and CEO, JG Summit

Gokongwei adds that the combined organisation will provide customers with a fuller range of banking products and services as it will “leverage on ecosystems of both the Gokongwei and Ayala Groups."

BPI will acquire 20% ownership of GoTyme

GoTyme is a prominent feature of this merger, facilitated by Robinsons Bank's 20% ownership interest in GoTyme. Just recently a pre-series C capital by Tyme raised $77.8 million, much of which will be used for GoTyme.

Ayala Group’s GCash is currently the largest payments wallet-turned-super-app in the country and has even outperformed legacy banks in terms of number of customers and number of transactions, however they do not own a banking licence, and have announced earlier this year that they “do not plan to get a digital banking licence at the moment”. However, GCash has been noted to have partnered this year with UNO Digital Bank and Collabera Digital which plans to increase its user base through developing and integrating a mini-applications in GCash.

The merger between BPI and JG Summit’s RBC, can result in further collaborations between GoTyme and GCash.

During the recent Singapore Fintech Festival 2023, GCash president and CEO Martha Sazon announced a new feature which will allow users to check real-time foreign exchange rates for countries like Singapore, Japan, and the USA.

Martha Sazon, President and CEO, GCash

Thanks to GCash's collaboration with Alipay+, users can conduct cashless transactions in 17 countries, including Singapore, Japan, and the USA. Additionally, the partnership allows international users from six countries, such as the USA, Italy, and Japan, to sign up for GCash using their international mobile numbers. This highlights GCash’s attempt to expand internationally and cater to many overseas Filipino workers, estimated to be at 1.96 million, by the Philippine Statistics Authority.

The BPI-Robinsons Bank merger signifies a pivotal moment in the Philippine banking landscape, driven by the imperative to compete in the digital era and address the evolving needs of consumers. The success of this merger will hinge on BPI’s ability to position itself in the growing digital banking market and integrate itself into the various sectors of one of the Philippines largest conglomerates.

Keywords: Mergers And Acquisitions, Bank Assets, Largest Banks, Conglomerates, Bank Partnership, Digital Banking, Digital Bank Licences
Institution: Bank Of The Philippine Islands (BPI), Robinsons Bank Corporation (RBC), Bangko Sentral Ng Pilipinas (BSP), Philippine Competition Commission (PCC), Landbank, Development Bank Of The Philippines (DBP), Ayala Group, Gokongwei Group, BDO, Globe, AC Industrials, Integrated Microelectronics (IMI), Tyme Group, PLDT, Cebu Pacific, Maharlika Investment Corp, BSP
Country: Philippines
Region: Southeast Asia
People: Jose Teodoro Limcaoco, Lance Gokongwei, Martha Sazon, Eli Remolona Jr.
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