BDO takeover seen as best solution to EIB problem

By Ted P. Torres, The Philippine Star

Posted at May 10 2012 07:31 AM | Updated as of May 10 2012 03:37 PM

MANILA, Philippines - The best commercial solution to rehabilitating Export and Industry Bank (EIB) is to negotiate and sell all its assets and liabilities to the only white knight, BDO Unibank Inc., the troubled bank’s top official said.

EIB chairman Jaime Gonzales said their interest is to protect their depositors, and allowing the largest bank in the Philippines to take over will be beneficial to the depositors and government.

“To us, the best commercial solution is to allow BDO to acquire the bank,” Gonzales said.

If the bank is liquidated, government will have to pay its over 50,000 depositors. Data shows that only up to P4-billion worth of deposits is covered by insurance while bulk at P10 billion is uninsured. Thus, the thousands of depositors will go home with only P500,000 each.

But a deal with BDO would mean saving both the depositors and government for losses and anxiety since the “white knight” would be assuming all the liabilities.

The decision, however, lies in the hands of the Philippine Deposit Insurance Corp. (PDIC) since it was appointed by the BSP as the EIB receiver last month. This was preceded by the voluntary “surrender” of the bank by its major stakeholders last month.

EIB admitted last month that it would not be able to service maturing deposits worth an estimated P800 million.

The government deposit insurer has received a proposal from BDO regarding its renewed bid to acquire EIB.

Prior to the receivership, the BSP approved an incentive package for BDO offering 30 branch licenses outside of the existing 50 branch licenses held by the troubled commercial bank. It will likewise get a “financial relief” with regards the anticipated liabilities BDO will inherit from the acquisition worth over P10 billion.

Majority of the existing 50 branches are located in the so-called restricted areas, which are basically located in the deposit-rich Metro Manila areas. 30 new licenses will also be for the restricted areas.

BDO president Nestor V. Tan said that the universal bank of the SM Group remains interested in “helping in the rehabilitation of the bank.”

“We are interested in helping government rehabilitate the bank,” Tan said, clarifying however that much will still depend on talks with the receiver.

As this developed, the state-run PDIC said it is set to tap a financial auditor to determine the valuation of EIB that was ordered closed by the BSP late last month.

PDIC said in a statement that the agency is now coming up with a terms of reference for all interested parties including BDO of retail and banking magnate Henry Sy that have expressed interest in acquiring the shuttered bank.

The state-run deposit insurer pointed out that it has 90 days to determine whether the proposal submitted by BDO is most advantageous to depositors, creditors, and taxpayers.

PDIC pointed out that BDO submitted a proposal to rehabilitate EIB with certain conditions.

However, officials refused to divulge the contents of the proposal including the conditions being sought by the country’s largest bank as it has to be approved by the PDIC Board and the BSP’s Monetary Board.

“BDO has submitted a proposal to rehabilitate EIB with certain conditions. PDIC is reviewing the legal and economic viabilities of said proposal. Some of the conditions as proposed are not within the authority of PDIC,” the statement read.

The agency explained that its immediate concern now is to take stock of the deposit liabilities of EIB and conduct payout for all valid insured deposits as soon as possible.

It announced that payment for accounts with balances of P10,000 and below is set to start by the end of the month. On the other hand, claims servicing operations for accounts of over P10,000 are expected to commence no later than end of June. – With Lawrence Agcaoili