BPI cements market position with Robinsons Bank merger: analyst

Assets are slated to increase by 0.9 percentage points.

Bank of the Philippine Islands or BPI’s planned merger with Robinsons Bank Corporation is expected to bring net positives to BPI, analysts said.

The merger will strengthen BPI’s domestic presence, according to S&P Global Ratings analysts Ivan Tan and Richard Noonan. 

“We believe the merger should cement BPI's market position as one of the largest privately owned banks in the Philippines, with its market share slated to increase by about 0.9 [percentage points],” Fitch Ratings wrote in a separate commentary.

BPI will be the surviving entity after the merger, which is set to be completed before end-2023. Existing RBC shareholders will hold approximately 6% of the amalgamated entity. BPI will also be acquiring more than 150 branches.

Immediate financial implications should be manageable for BPI, considering RBC’s relatively modest scale and reasonable financial profile, Fitch added.

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Although RBC's asset quality is weaker than that of BPI, Fitch estimates that the acquired non-performing loans (NPLs) would increase BPI's NPL ratio by only about 0.2 percentage points, given that RBC's total balance sheet is just 7% of that of BPI.

The merger will also strengthen ties between the two banks’ parent companies, Ayala Corp. and the Gokongwei Group.

“The merger could generate lending and fee income opportunities, given Gokongwei Group's diverse business operation across the country. In our view, operational integration would be manageable, and could present cost synergies via elimination of branch overlaps, given both banks have a domestic focus,” Tan and Noonan said.

The deal would also see BPI gain a 20% stake in GoTyme Bank, the digital bank joint venture between RBC, Gokongwei Group and Singapore-based GoTyme. Fitch said that this would help BPI broaden its retail offerings and tap new, albeit potentially higher-risk, underserved customers in the Philippines. 

“The incremental credit risks from expanding into underbanked sectors will hinge on BPI's strategy and risk posture, which we expect to remain relatively disciplined. Moreover, we believe higher interest rates and softening business and consumer sentiments are likely to temper BPI's loan growth momentum in the near term,” the ratings agency noted.