Coconut Bank for Sale in Philippines Forecasts Improved Earnings

United Coconut Planters Bank, a 50-year-old Philippine lender set up to service the nation’s coconut industry, is forecasting higher profit this year as it prepares itself for a sale.

The bank’s first-quarter net income grew 3 percent from a year earlier and full-year profit is forecast to rise to as high as 3.5 billion pesos ($78 million) from 3.13 billion pesos in 2014, President Jeronimo Kilayko said in an interview on May 25. Profit fell 11 percent last year.

The government will sell its 74 percent stake in the bank in September, enabling the lender to raise fresh capital for the first time since it was taken under state control in 1986. The buyer must inject at least 15 billion pesos in capital and offer details for the sale are due by the end of this month, the Department of Finance said on May 13.

“We need additional capital and for us, that’s the main activity,” Kilayko said, referring to the stake sale. The bank’s growth has been held back because ownership issues prevented it from raising capital, he said.

Once known as Cocobank, the company was seized by the government 29 years ago on suspicion its shares formed part of the ill-gotten wealth of former dictator Ferdinand Marcos and his associates. Marcos collected a levy from more than 1 million coconut farmers in 1973 to 1982 for a fund meant to stabilize prices for a nation that is the world’s biggest exporter of coconut oil.

Court Wrangle

The government has had to bail out the bank at least twice since taking control, and the lender has been unable to raise capital amid wrangles in court over a stake claimed by San Miguel Corp. Chairman Eduardo Cojuangco, uncle of current Philippine President Benigno Aquino. In 2012, the government won a court ruling granting it Cojuangco’s stake in the lender.

The most recent government bailout was in 2008 when the bank received at least 25 billion pesos in state deposits, while Philippine Deposit Insurance Corp. converted 12 billion pesos it lent to the firm in 2003 into United Coconut Planters Bank notes.

The buyer of the government stake would need to put in about 22 billion pesos to increase the capital adequacy ratio to about 15 percent from the current 10 percent, Chief Finance Officer Cesar Rubio said. The amount includes 12 billion pesos it must return to the deposit insurer.

The proceeds of the sale will go to a fund that will benefit coconut farmers, Francis Pangilinan, presidential adviser on food security, said on Feb. 26.

Philippine National Bank is interested in the stake, President Reynaldo Maclang said Tuesday. East West Banking Corp. said a year ago that it may also look at it.

The bank has 188 branches, a leasing and finance company, a securities brokerage, an investment-bank license and real estate investments. It had 257.2 billion pesos in assets at the end of 2014, the 12th-largest among lenders in the Philippines, according to central bank data.

Car, property and personal loans, which now account for 30 percent of lending, helped accelerate growth in first-quarter net interest income to 19 percent from 16 percent in all of 2014, Rubio said. Consumer loans are projected to rise 30 percent in 2015 after increasing 25 percent last year, he said.