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Acquisition of Bank of Commerce

in the Philippines
8 May 2012
Agenda
1. Summary

2. Philippines Economy and Banking Sector

3. Overview of BoC

4. Details of Acquisition

5. Effects of Acquisition

6. Business Plan

7. Timeline

8. Final Remarks
SUMMARY
Summary
 60% of Bank of Commerce (“BoC”) from the San Miguel Corporation (“SMC”) Group and others for
PHP12.2 bil (RM881 mil), equivalent to 1.14x P/BV as at 31 Dec 2011. Post alignment with CIMB’s
accounting and provisioning policies, P/BV could increase to about 1.30x

 SMC Retirement Plan retains 27% stake

 CIMB signs Collaboration Agreement with SMC for banking referrals into SMC eco-system

 BoC ranks 16th in term of total assets among 38 universal and commercial banks in the Philippines

 Philippines has been the “missing link” in CIMB Group’s ASEAN footprint

 “Option” on probable “take-off” of Philippines economy

 BoC has been in “clean-up” mode so it is under-leveraged with high growth potential

 SMC is a strong partner with impressive range of businesses and network of business partners

 BoC will leverage on CIMB Group’s management capabilities and ASEAN platform and network

4
PHILIPPINES ECONOMY AND BANKING SECTOR
5th Largest Economy and 2nd Largest by Population in ASEAN
Indonesia Thailand Malaysia Singapore Philippines Vietnam Myanmar Brunei Cambodia Laos

Population
240.5 64.3 28.7 5.3 95.8 89.3 62.4 0.4 14.4 6.6
(mil)

834.3

Nominal GDP
339.4
(USD ‘bil)
266.5 247.6
216.1

121.6
50.2
15.6 13.2 7.9

Indonesia Thailand Singapore Malaysia Philippines Vietnam Myanmar Brunei Cambodia Laos

CIMB’s
UB UB UB UB No IB Rep IB CB WIP
presence
presence presence presence presence presence presence office presence presence

Note: Data as at 2011


Source: IMF statistics 6
Growing Optimism

 The near-term outlook for the Philippines’ recent performance


country is favourable, characterized indicates that the country’s economy
by moderating but still rapid growth has already stabilized since the global
 Praise the Aquino government for financial crisis, with more robust and
starting “reforms to address long- less variable growth
standing constraints to growth.”
World Bank, 2011
IMF, 2011

There is a clear market consensus


emerging that Aquino's economic The Philippines has the potential to
program is on the right track, one become one of the top 10
that could see an unprecedented countries that can greatly
influx of capital to the Philippines contribute to global growth within
in 2012 the decade

Asia Times Online, 2012 Goldman Sachs, 2012

7
Increasing Trade and Remittance Volume with ASEAN
Philippines-ASEAN Trade

21.1%
Within ASEAN, MIST are the largest trading
partners of the Philippines
20.0% Others
6% Malaysia
% of Total 22.8
16%
Philippines Trade Thailand
23%
Indonesia
21.2 12%

Philippines-
ASEAN Trade
(USD ‘bil) Singapore
43%

2008 2011

Philippines-ASEAN Remittance

4.7% SG and Malaysia are the top 2 ASEAN countries


sending remittance to the Philippines
% of Total 3.8%
944.7 Thailand Others
Philippines 1% 1% Malaysia
Remittance 13%
620.5 Indonesia
2%

Philippines-
ASEAN
Remittance
(USD ‘mil)
Singapore
84%
2008 2011

Source: Philippines National Statistical Office


8
Improved Corruption Perception and Overall Competitiveness
 World Economic Forum ranked the Philippines as 75th in the world in its 2011-2012 Global Competitiveness
Report

 In the area of Macroeconomic Environment under the same report, Philippines improved 14 places to 54th in
the world noting the country’s improved national savings, managed inflation, low interest rate
environment, lowering debt-to-GDP ratio, and credit ratings upgrade during the year

Corruption perception and overall competitiveness of ASEAN countries

Corruption Index Ranking Overall Competitiveness Index Ranking


Countries
2010 2011 2010 2011
Singapore 3 5 3 2
Malaysia 56 60 26 21
Thailand 78 80 38 39
Indonesia 110 100 44 46
Vietnam 116 112 59 65
Philippines 134 129 85 75
Laos 154 154 n.a n.a
Cambodia 154 164 109 97
Myanmar 176 180 n.a n.a

Sources:
1) Transparency International 9
2) World Economic Forum - Competitiveness Index
However Unemployment Rates and FDIs Remain An Issue
Unemployment (%) FDI from 2007 to 2010 (USD ‘bil)

9.1

8.4 Singapore 99.5


7.9
7.5 7.4 7.5 7.3
7.2
7.4 6.6
Indonesia 34.4
7.1 6.3

4.6 4.7 4.6


4.4 Vietnam 31.8
4.1 4.1
3.7
3.2 3.3 3.3
3.2
3.0
Thailand 31.1
2.1 2.2 3.0 2.2 2.3
2.1

1.4 Malaysia 26.5


1.4 1.4 1.3 1.3
1.1

2007 2008 2009 2010 2011 E 2012F


Phillipines 8.1
Malaysia Indonesia Singapore
Thailand Phillipines Vietnam

Source: BSP statistics


10
Philippines Banking Sector Has Yet To Take-Off
Total Assets Net Loans1 Total Deposits
PHP ‘bil PHP ‘bil PHP ‘bil
CAGR 8.1%
CAGR 6.9%
CAGR 8.5%
6,918 7,038
5,125 5,036
6,192
3,201
4,672
5,676 2,908
4,195
2,698
2,560

2008 2009 2010 Sep-11 2008 2009 2010 Sep-11 2008 2009 2010 Sep-11

Consumer Loans Deposits Breakdown OFW remittances


PHP ‘bil CAGR 13.7% USD ‘bil CAGR 7.6%

23% 23% 21% 22% 20.1


518
473
413 23% 21% 18.8
26% 23%
363
17.3

37% 38% 39% 16.4


35%

16% 17% 18% 19%

2008 2009 2010 Sep-11 2008 2009 2010 Sep-11 2008 2009 2010 2011
Mortgage Credit Card Auto Others Demand Savings Time Foreign

Notes:
1. Net Loans excludes interbank loans 11
2. Based on exchange rate of USD:PHP = 43.212
Source: BSP website
Overall Banking Penetration Is Still Low
Loan penetration in 2010 Deposit penetration in 2010

Cambodia 11% Cambodia 14%

Indonesia 28% Indonesia 37%

Philippines 34% Philippines 55%

Thailand 86% Thailand 75%

Singapore 104% Singapore 140%

China 137% China 197%

Malaysia 149% Malaysia 187%

Hong Kong 241% Hong Kong 392%

Outstanding loans as a % of GDP Deposits as a % of GDP

Source: Central bank statistics of selected countries


12
OVERVIEW OF BOC
Overview of BoC
122 branches 300 ATMs 1,662 employees ~350k customers

 16th largest bank by total assets in Philippines

 Core business: Traditional deposit products, corporate banking, consumer banking, treasury, asset management,
trust services, trade, and credit card service

 Owns 24.25% equity interest in Bancommerce Investment Corporation (“BIC”) which provides IB services

 80.37% owned by SMC Group, 9.8% owned by Caritas Health Shield and 12.7% owned by minority shareholders

Recent History

2007  SMC Group injected capital into BoC for 34% stake

00  SMC Group injected further capital into BoC and gradually increase its stake to 80.37%
 SMC Group undertook various initiatives to clean up and deleverage the bank
2008 - 2012
 Orderly disposal of structured notes
 Management overhaul and workforce rationalisation
 Embarked on IT transformation programme

 Healthy capital position with CAR of 23%


Present  Low LDR (~45%) as SMC has been focusing on cleaning up the bank and exploring options for a
partner to manage the bank

14
Comparative Analysis
Total Assets, Total Deposits and Net Loans1
(PHP ‘bil)
1,200 Market Share: Total Assets 1.5%; Total Deposits: 1.6%, Net Loans: 1.5%
1,000

800

600 #16
400

200

0
BDO Metrobank BPI Land Dev Bank PNB RCBC Union Citibank CBC Security UCPB HSBC Allied Phil Trust BoC
Bank Bank Bank Bank
Total Assets Total Deposits Total Loans

Branch Network2 Capital Adequacy Ratio1


24% Tier 1 CAR CAR
812 785
744 22%
20%
18% Average CAR3
16% = 16.5%
387 Average Tier 1
334 327 14%
315 293 CAR3 = 14.3%
219 12%
189
122 10%
8%
6%
BoC
Land Bank
PNB

UCPB
BDO

CBC
BPI

RCBC

Allied Bank

Union Bank
Metrobank

Allied Bank

Phil Trust
HSBC

BoC
PNB

CBC

UCPB
BPI
BDO

RCBC

Citibank
Union Bank
Metrobank

Land Bank

Dev Bank

Security Bank
Notes: BDO = Banco De Oro Unibank,, BPI = Bank of the Philippine Islands, Land Bank = Land Bank of the Philippines, PNB = Philippine National
Bank, Dev Bank = Development Bank of the Philippines, RCBC = Rizal Commercial Banking Corporation, CBC = China Banking Corporation, UCPB = 15
United Coconut Planters Bank
1.Based on financial statements published in BSP website as at 31 Sep 2011 2. As 31 Dec 2011 3. Average of top 15 Philippines banks by total assets
BoC Indicators (1)
Profitability Deposits Gross Loans

PHP ‘bil PHP ‘bil


13.6% 7.0% 3.9%
86.8 87.2
-56.0%
ROE
77.9
71.8
Net 639.3
617.3 579.9
Profit 39.2
PHP ‘bil 36.4
31.5 32.6
2008 2009 2010 2011

2008 2009 2010 2011 2008 2009 2010 2011


(1,714.6)

NIM Asset Quality Total CAR and Tier 1 CAR


180.1%
180.1%
180.0% 20.0%
160.0% 18.0%
81.9%
140.0% 49.7% 78.1% 16.0%
23.1%
39.9% 14.3%
39.9% 49.7% 14.0%
120.0%
4.7% 12.0%
9.9% 16.8% 23.1%
100.0% 15.1%
10.8% 14.4% 15.6%
3.7% 3.5% 3.6% 88.8%
8.2% 10.0%
80.0% 22.9% 25.1%
2.9% 78.1%
8.0%
10.7%
65.3% 16.3%
60.0% 14.3%
49.7% 6.0% 12.8%
40.0% 39.9%9.9% 4.0%
20.0% 7.2%
-9.6% 2.0%
0.0% 0.0%
2008 2009 2010 2011 2006
2008 20072009 2008 2009
2010 2010 2011
2011 2008 2009 2010 2011

Allowance Coverage Net Impaired Loans ratio Total CAR Tier 1 CAR

16
BoC Indicators (2)
LD Ratio CI Ratio

68.0% 68.4% 63.9%


66.5%
62.6% 62.8%
62.0%

50.0%
60.0% 61.7%
45.4% 61.5%
41.9%

36.1%

2008 2009 2010 2011 2009 2010 2011

BoC Industry BoC Industry

 Low LDR ~ 45% as BoC has not pursued  Higher CI Ratio for Philippines banks relative to
aggressive loan growth other ASEAN banks due to:
 Corporate and SME loans comprise ~95% of total  Continued reliance on counter service in
loan book branches
 Under developed IT infrastructure to enhance
 Significant growth potential to expand its retail loan operations efficiency
portfolio

17
DETAILS OF ACQUISITION
Acquisition Structure
Current Shareholding Structure

Entities related to SMC Group (Total = 80.37%)


San Miguel SMC Retirement Caritas Health
Q-Tech Alliance Others
Properties Plan Shield *
1.08% 39.35% 39.94% 9.77% 9.86%

BoC

Post Acquisition

San Miguel SMC Retirement Caritas Health


CIMB Bank Others
Properties Plan Shield *
1.14% 26.93% 59.98% 9.77% 2.18%

BoC

Note: * Health care provider with over 100 branch offices supported by 554 hospitals and clinics serving ~300,000 members
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Purchase Consideration and Valuations
RM ’mil  We will be acquiring:
 A ready banking platform in the Philippines
Purchase Consideration 881  Low LD ratio and high capital for growth
 Collaboration with one of the largest
59.98% book value 770 conglomerates in Philippines

P/BV 1.14x

 RM111 mil premium to book for controlling stake


 2011 net P/E multiple of 35x as BoC operating at
suboptimal levels
 Post alignment with CIMB’s accounting and
provisioning policies, P/BV could increase to
about 1.30x

Note: * Adjustments made to the book value for the purposes of the Proposed Acquisition subsequent to due diligence
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Overview of SMC Group
 Philippines’ most diversified conglomerate and one of the
largest publicly listed companies

 Total revenue in 2011 is PHP536 bil (RM38.8 bil)


contributed about 5% to the country’s GDP

 Subsidiaries and affiliates have very strong industry-


leading positions in key sectors of the Philippine economy

 Has over 17,000 employees as of end 2011

 Growing presence in ASEAN

2011 2010
Key Annual
Revenue Revenue
Businesses growth
(PHP ‘bil) (PHP ‘bil)
Beverages 87.0 90.3 -4%

Food 89.6 80.4 11%

Power 71.4 66.1 8%

Packaging 24.1 23.4 3%

Fuel & Oil 274.0 229.1 20%


SMC Group recently completed an investment in PAL
Holdings, the parent company of Philippine Airlines
Inc. and Air Philippines Corp

21
Overview of the Collaboration Agreement with SMC
CIMB to be the preferred banking services provider for the SMC ecosystem

1) Channeling/referral of wholesale and retail banking opportunities

2) SMC companies shall provide relevant information necessary to undertake credit


Scope review of the vendors/dealers

3) Co-location of retail distribution points, e.g. setting up branches/ATMs at Petron


stations

Wholesale banking Retail banking

 SMC Group  Employees of the SMC Group and of


 Vendors/suppliers of the SMC Group affiliate companies of SMC
Entities/Subjects  Retail customers of the SMC Group
 Dealers/sub-dealers of the SMC Group

 Loans and deposits  Salary accounts


 Transaction banking  Housing loans
 Treasury  Car loans
Products/Services  Investment banking  Staff personal loans
 Securities services, e.g. trustee &  Credit/debit cards
custodial services

Note:
1) Subject to the Bank’s approved licenses, service capabilities, as well as regulations of BSP and/or other Philippines regulatory agencies 22
EFFECTS OF ACQUISITION
Proforma Financial Effects
31 Dec-11 BoC
Proforma
(RM ’mil) Contribution

Balance Sheet

Total assets 300,203 6,928 307,131 2.31%

Gross loans 191,393 2,361 193,754 1.23%

Customer deposits 221,933 5,204 227,137 2.34%

Income Statement

Total Income 12,122 353 12,475 2.91%

Net interest income * 7,947 234 8,181 2.95%

Net earnings 4,031 42 4,056 0.63%

Notes:
PHP/MYR exchange rate as at 31 Dec-11 of 13.80 24
* Includes Islamic net financing income
Proforma Key Ratios
Increase /
31 Dec-11 (%) Proforma
(Decrease)

NIM 3.12 3.60 3.13 +0.01

Non-interest income / total


34.4 33.8 34.4 -
income

Cost / Income 54.7 61.7 54.9 +0.20

Allowance coverage 81.1 81.9 81.1 -

Net impaired loans ratio 1.0 2.9 1.0 -

Loans to deposit ratio 86.2 45.4 85.3 -0.90

CASA ratio 34.5 67.3 35.3 +0.80

Note:
PHP/MYR exchange rate as at 31 Dec-11 of 13.80 25
Proforma Financial Impact
Impact to Balance Sheet,  Minimal impact to CIMB Group financials & key ratios
P&L & Key Ratios

Estimated Capital Impact  CIMB Bank’s capital position remains strong post- transaction, well above the
proposed internal targets and the minimum regulatory ratios for Basel 2

 Under Basel 2

 Core Tier 1 ratio and Tier 1 ratio remain unchanged

 RWCR: ~ 70 bps decline in FY2012

 No impact to CIMBGH’s DL & Gearing ratio

Estimated EPS and ROE  EPS & ROE accretive from 2013 onwards
Impact
 Expect only 3-4 months consolidation for 2012

26
BUSINESS PLAN
Initial Thoughts
 To be among the top 10 banks in the Philippines in terms of assets
 To be No.1 ASEAN universal bank of choice in the Philippines for local and regional customers
 Key focus areas : Wholesale, Mass Affluent Retail and Remittance

Supported by CIMB Group’s UB platform

People Branding / Marketing Systems / Platforms Products


Leverage our product Shared ASEAN branding Regional ATM link, CIMB CIMB Money Transfer, credit
experts, e.g. customised for local market Clicks, 1Platform, etc cards, CIMB Preferred , etc
Treasury, IB, retail

Branches 321 630 157 2 7 122 1,239

ATMs 2,199 1,749 533 6 10 300 4,797

Staff 20,575 13,933 4,198 1,323 93 1,662 41,784

Customers 7.8 mil 4.2 mil 2.2 mil 277 k 3k 350 k 14.8 mil

Detailed Plan Being Formulated

28
Overview of Business Strategy for Philippines
 Tap into ready pool of corporates to offer integrated/ regional corporate banking
products and IB services

 Strengthen transaction banking capabilities to enhance deposit-taking, especially


CASA

 Systematically target the mid corporate/ SME especially those in the SMC
Wholesale Banking
ecosystem value chain, e.g. suppliers, dealers, retailers

 Position CIMB as the preferred ASEAN bank for cross-border transactions, e.g.
trade finance, regional treasury products, etc

 Upgrade license from commercial to universal bank

 Leverage regional strengths to simultaneously target 2 distinct market propositions


in the Philippines:

 Affluent segment – Replicate regional offerings in the Philippines, e.g. CIMB


Preferred, regional credit card proposition, regional ATM link, etc

 Regional remittance – Leverage our regional footprint and explore global


Retail Banking
partnerships to capture the vast cross-border remittance opportunities in the
Philippines

29
TIMELINE
Indicative Timeline
Details Indicative Timing

Signing of Definitive Agreements / Bursa Announcement 8 May 2012

Submission / application to regulatory authorities and any other relevant


Late May 2012
parties

Regulatory approvals obtained (assume 3 months) # Late Aug 2012

Completion Late Aug 2012

Registration of shares Late Sep 2012

Note: # Subject to timing of regulatory approvals


31
FINAL REMARKS
In Summary
High Growth Potential Widen Platform Strong Partnership

 Banking market still  Increasing CIMB Group’s  Leverage on SMC companies’


underpenetrated presence in ASEAN to cover retail footprint to strengthen
 5th largest economy in ASEAN 99% of ASEAN population and BoC’s distribution capabilities
with a stable growth rate almost 100% of ASEAN GDP  Tap into SMC’s >17,000
 Stabilising political situation  Enhances our scale and employee base for distribution
position to capture intra-ASEAN of retail banking products
 Increasing trading links with flows
ASEAN  Tap into SMC companies’
vendors and clients base

33
Final Remarks
 Recent acquisitions of BOC and RBS IB for a total of RM1,730 mil cash

 No equity dilution, small goodwill addition and EPS neutral in 2012 and positive in 2013

 Enhanced CIMB Group’s intrinsic franchise value

 Effectively full coverage of ASEAN

 Largest retail branch network in ASEAN

 Largest APAC based IB

 No further (significant) acquisitions being contemplated

34
THANK YOU

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