DBS Group Holdings Ltd. (DBS), Southeast Asia’s largest lender, agreed to sell its remaining stake in Bank of the Philippine Islands for S$850 million ($681 million) to focus on key markets including Singapore and Hong Kong.
The transaction, to be completed in two phases ending in March, will generate a gain of about S$447 million over the carrying value, DBS said in a statement yesterday. The 9.9 percent stake will be acquired by GIC Pte, Singapore’s sovereign wealth fund, and Ayala Corp. (AC), the Philippine company that is already BPI’s biggest stakeholder. The divestment is DBS’s largest to date, data compiled by Bloomberg show.
DBS began exiting its 14-year investment in BPI, the largest lender by market value in the Philippines, in October 2012 as Chief Executive Officer Piyush Gupta sought to bolster capital buffers. Growth in the Philippine economy, which has expanded by more than 7 percent for four quarters, may slow in the remainder of this year after Typhoon Haiyan devastated some provinces.
“In the last two years, the Philippines became a very hot market,” Kenneth Ng, a Singapore-based analyst at CIMB-GK Securities Pte, said by telephone. “One of the reasons why they sold was that the rising Philippine market gave them the opportunity to do so.”
The benchmark Philippine Stock Exchange Index (PCOMP) has rallied 46 percent in the past two years as improved economic propects helped the nation win its first investment-grade debt ratings.
Shares of BPI (BPI) rose 0.1 percent to 90.60 pesos as of 2:21 p.m. Manila time, halting three days of declines. The stock has gained 6 percent in the past year. Ayala fell 2.8 percent to 560 pesos, while DBS gained 0.2 percent to S$16.97.
GIC will buy 5.6 percent of the Philippine bank and Ayala will purchase 4.3 percent, lifting its stake to 48.3 percent, Ayala said in a statement today.
“This acquisition is both a value and earnings accretive investment for Ayala,” Ayala President and Chief Operating Officer Fernando Zobel de Ayala said in the statement. “BPI has been a significant growth driver for Ayala over the years and we believe its earnings growth momentum will continue in step with the expansion of the Philippine economy.”
The nation’s gross domestic product rose 7.5 percent in the second quarter from a year earlier, matching China’s pace and higher than the government target at the time of 6 percent to 7 percent for the year. GDP growth this year may be as much as half a percentage point lower than a previous estimate of 7.3 percent to 7.5 percent following Typhoon Haiyan, according to Jun Trinidad, a Manila-based economist at Citigroup Inc.
The acquisition adds to GIC’s holdings of financial assets, which, including real estate, make up the biggest share of its listed holdings, according to data compiled by Bloomberg. The sovereign wealth fund owns a 3.7 percent stake in Citigroup Inc. (C), valued at $5.6 billion.
GIC also owns 6.4 percent of UBS AG, an investment worth about $4.47 billion. The Singapore fund has a 0.4 percent stake in HSBC Holdings Plc and a 0.4 percent stake in Barclays Plc.
DBS’s sale of its BPI shares follows its divestment in October last year of a 10.4 percent holding in the Philippine lender to Ayala for S$757.3 million. The bank booked a gain of S$450 million from that sale in the fourth quarter of 2012, according to a statement on Feb. 6, when DBS reported its fourth-quarter earnings.
The Singaporean lender held 20.3 percent of the Philippine bank prior to the 2012 sale. It acquired a 19.7 percent stake for about S$1.2 billion from “several investors” in 1999, a purchase that followed the 1997 Asian financial crisis. The Philippine benchmark stock index fell 41 percent that year.
DBS, which has been trying to increase the share of its earnings from overseas markets, will focus on its core markets of Singapore, Hong Kong, China, Taiwan, India and Indonesia, it said in yesterday’s statement.
Standard Chartered Plc, the U.K. bank that makes three-quarters of its earnings in Asia, will review its business to cut back or withdraw from less-profitable markets, Chief Executive Officer Peter Sands said in London yesterday.
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