The Market Monitor Minding the Nation's Business
By Jerry Maglunog
United Coconut Planters Bank (UCPB) may be one of the top unibanks in the country, but the government is having a hard time selling it because of its political baggage.
When the Philippine Deposit Insurance Corp.(PDIC) announced last year that the government is selling its 72.2-percent stake in the bank, four unibanks immediately sent their intention to buy the government stake.
Then, two officials were making the announcement, Valentin Araneta, then PDIC president, and Norman Martin Reyes, UCPB’s senior vice president. Now, both officials are no longer holding the same position.
Araneta is now a member of the Monetary Board, while Reyes has already transferred to the Philippine National Bank. As of the latest development, 12 entities (mostly banks) are interested to get the government share in UCPB.
According to MB member Felipe Medalla, many banks are interested to acquire the stake offered at UCPB as buyers no longer need to shell out P20 million for every branch they will open in eight cities in Metro Manila. UCPB, according to its website, has 188 branches and around 300 automated teller machines.
“The government doesn’t want to acquire another bank as it already has LandBank and DBP,” Medalla said in an interview. Finance Undersecretary Gil Beltran, who then acted as officer-in-charge of the Privatization and Management Office, said any bank that is willing to pay government P15 billion can get UCPB.
As the development to what bank will get government shares at UCPB, three banks have already denied they are interested over the bank
First to deny interest was Banco de Oro, the country’s leading unibank in assets at over P1.7 trillion. “It will just be plain speculation at this stage,” BDO President and Chief Executive Officer Nestor Tan said.
Second to deny was Asia United Bank. Its president and chief operating officer, Abraham Co, said taking over the bank is “costly.” “No, we are not looking at UCPB,” Co affirmed.
Third to backpedal from UCPB is Bank of Commerce, the banking arm of San Miguel Corp.
Unlike the two banks, Bank of Commerce withdrew its intention to buy the bank because its assets (P98 billion) are less than that of UCPB (P265 billion). With the denials of some banks to get UCPB, anyone can say that the sale of the bank is not simple.
Co has a deeper explanation why selling government stake at UCPB is not that simple. “The money needed to capitalize the bank is no joke,” he said. What is more compelling, according to Co, is why is the terms and conditions have not yet been discussed.
According to the banker, once the government gets the P15-billion share in the net worth of the bank, the new owner “will be left on the ground zero” and needs to raise at least P30 billion to make the bank continue doing business.
“The buyer has to invest P45 billion to get a bank of P265 billion [assets]. That’s expensive because P15 billion to the government gets you just on ground zero,” he said.
Bankers’ Association of the Philippines (BAP) President Lorenzo Tan, meanwhile, has reaffirmed its vote of confidence for the UCPB, reiterating that it is a good franchise led by reputable bankers, but has to meet Basel 3 capital requirements before the government can sell its share in the bank.
“It’s a good franchise with loyal customers, but needs to meet Basel 3 capital requirements,” Tan, who incidentally was the bank’s president when it was undergoing rehabilitation from 1997 to 2001. It was Tan who steered UCPB back to life using the P20-billion bailout fund provided by the PDIC. However, like Co and the other Tan, the BAP president said it’s seems not easy to sell government stake at the bank.
UCPB started on May 15, 1963, as First United Bank (Philippines). With only four branches at the time, it was a small commercial bank.
UCPB’s origin can be found in Presidential Decree 775 (or P.D. 775) where then president Ferdinand Marcos in July 29, 1975, instructed the Philippine Coconut Authority (PCA) to “formulate and recommend for adoption credit policies affecting production, marketing and processing of coconut and other palm oils” and “to provide readily available credit facilities to the coconut farmers at preferential rates.”
The PCA, headed by Juan Ponce Enrile, then purchased the 72.2- percent of First United Bank owned by Jose Cojuangco. Cocobank was the official short bank name in the 1980s and the early 1990s.
In 1990, UCPB, along with Equitable Banking Corp. (now Banco de Oro), Philippine National Bank and the Far East Bank and Trust Company (now the Bank of the Philippine Islands), formed MegaLink, one of the three main interbank networks in the Philippines.
However, UCPB’s ATM services date back to the 1980s, when it was one of the first financial institutions to offer ATM services. It established its preneed services arm, Cocoplans, in 1993.