CIMB going brave

Last week, CIMB entered into a conditional Share Purchase Agreement with the San Miguel Group and various minority shareholders for the proposed acquisition of a 60% stake in Bank of Commerce (BOC) in the Philippines. CIMB will be investing to the tune of RM 879 million in cash, valuing BOC at 1.14 times book value as at 31st December 2011.

The acquisition marks another milestone for the Group as they poised to enter Philippines and effectively complete their presence across ASEAN (No news to go to Laos yet).

Philippines banking market has been a tough one for foreigners, and many locals too as a few conglomerates with banks, dominate the business landscape. And the political and economic landscape wasn’t appealing for foreign investors.

Lately there is a sense substantive and positive changes in the country. The new administration seems to doing the right things - fighting corruption, encouraging investments and prudently managing the economy. The Philippines economy has been steadily growing at 5% for the past 10 years and trading links with other ASEAN countries are expanding. And according to CEO Datuk Nazir, "I suspect if we don’t enter now, entry prices will get much higher soon. I am also positive about entry now because we have found the right mode of entry - a good platform and the choice conglomerate eco-system - San Miguel"

If this cquisition materialised, CIMB Group will control the 16th largest bank in the Philippines in terms of total assets and a ready banking platform in the country. Relying on 122 branches and 300 ATMs throughout the country but mainly in metro Manila.

In addition, CIMB also signed a Collaboration Agreement with San Miguel for referrals of wholesale and retail banking opportunities to San Miguel entities as well as their suppliers and partners. San Miguel will remain as the largest minority shareholder of BOC via San Miguel Retirement Plan, its employee provident fund.

Datuk Nazir added "BOC is small today but has a very low loan/deposit ratio and is well capitalised to grow rapidly. At the same time, BOC strengthens our overall ASEAN UB proposition, reaffirming our status as having the largest bank network at 1,239 branches and extending our platform into a market that has been our “missing link”.