Post on 08-Mar-2020
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
4
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
PHILIPPINES ECONOMY AND BANKING SECTOR
6
5th Largest Economy and 2nd Largest by Population in ASEAN
Indonesia Thailand Malaysia Singapore Philippines Vietnam Myanmar Brunei Cambodia Laos
Population
(mil)240.5 64.3 28.7 5.3 95.8 89.3 62.4 0.4 14.4 6.6
Nominal GDP
(USD ‘bil)
CIMB’s
presenceUB
presence
UB
presence
UB
presence
UB
presence
No
presence
IB
presence
Rep
office
IB
presence
CB
presence
WIP
834.3
339.4
266.5 247.6216.1
121.6
50.215.6 13.2 7.9
Indonesia Thailand Singapore Malaysia Philippines Vietnam Myanmar Brunei Cambodia Laos
Note: Data as at 2011
Source: IMF statistics
7
Growing Optimism
The Philippines has the potential to
become one of the top 10
countries that can greatly
contribute to global growth within
the decade
Goldman Sachs, 2012
There is a clear market consensus
emerging that Aquino's economic
program is on the right track, one
that could see an unprecedented
influx of capital to the Philippines
in 2012
Asia Times Online, 2012
Philippines’ recent performance
indicates that the country’s economy
has already stabilized since the global
financial crisis, with more robust and
less variable growth
World Bank, 2011
The near-term outlook for the
country is favourable, characterized
by moderating but still rapid growth
Praise the Aquino government for
starting “reforms to address long-
standing constraints to growth.”
IMF, 2011
8
Increasing Trade and Remittance Volume with ASEAN
8Source: Philippines National Statistical Office
Philippines-ASEAN Remittance
Philippines-ASEAN Trade
Philippines-
ASEAN Trade
(USD ‘bil)
% of Total
Philippines Trade
Within ASEAN, MIST are the largest trading
partners of the Philippines
Philippines-
ASEAN
Remittance
(USD ‘mil)
% of Total
Philippines
Remittance
SG and Malaysia are the top 2 ASEAN countries
sending remittance to the Philippines
21.2
22.8
20.0%
21.1%
2008 2011
Malaysia 16%
Indonesia 12%
Singapore43%
Thailand 23%
Others6%
620.5
944.73.8%
4.7%
2008 2011
Malaysia 13%
Indonesia 2%
Singapore84%
Thailand 1%
Others1%
9
Improved Corruption Perception and Overall Competitiveness
9Sources:
1) Transparency International
2) World Economic Forum - Competitiveness Index
Corruption perception and overall competitiveness of ASEAN countries
CountriesCorruption Index Ranking Overall Competitiveness Index Ranking
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
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
10
However Unemployment Rates and FDIs Remain An Issue
10
Unemployment (%) FDI from 2007 to 2010 (USD ‘bil)
3.2 3.33.7
3.33.2
3.0
9.1
8.4
7.9
7.1
6.6
6.3
2.1 2.2 3.0 2.2 2.12.3
1.4 1.4 1.31.1
1.4 1.3
7.27.5
7.4
7.4 7.5 7.3
4.6 4.7 4.64.4
4.1 4.1
2007 2008 2009 2010 2011 E 2012F
Malaysia Indonesia Singapore
Thailand Phillipines Vietnam
8.1
26.5
31.1
31.8
34.4
99.5
Phillipines
Malaysia
Thailand
Vietnam
Indonesia
Singapore
Source: BSP statistics
Consumer Loans Deposits Breakdown OFW remittances
Total Assets Net Loans1 Total Deposits
11
Philippines Banking Sector Has Yet To Take-Off
Notes:
1. Net Loans excludes interbank loans
2. Based on exchange rate of USD:PHP = 43.212
Source: BSP website
PHP ‘bil
CAGR 8.1%
2,5602,698
2,908
3,201
2008 2009 2010 Sep-11
CAGR 8.5%
PHP ‘bil
4,195
4,672
5,125 5,036
2008 2009 2010 Sep-11
PHP ‘bil
CAGR 6.9%
2008 2009 2010 Sep-11
Mortgage Credit Card Auto Others
363413
473518
CAGR 13.7% PHP ‘bil
16% 17% 18% 19%
35% 37% 38% 39%
26% 23% 23% 21%
23% 23% 21% 22%
2008 2009 2010 Sep-11
Demand Savings Time Foreign
USD ‘bil
16.4
17.3
18.8
20.1
2008 2009 2010 2011
CAGR 7.6%
5,676
6,192
6,918 7,038
2008 2009 2010 Sep-11
12
Overall Banking Penetration Is Still Low
12
Loan penetration in 2010 Deposit penetration in 2010
Source: Central bank statistics of selected countries
Outstanding loans as a % of GDP Deposits as a % of GDP
241%
149%
137%
104%
86%
34%
28%
11%
Hong Kong
Malaysia
China
Singapore
Thailand
Philippines
Indonesia
Cambodia
392%
187%
197%
140%
75%
55%
37%
14%
Hong Kong
Malaysia
China
Singapore
Thailand
Philippines
Indonesia
Cambodia
OVERVIEW OF BOC
14
Overview of BoC
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
00
122 branches 300 ATMs 1,662 employees ~350k customers
Recent History
2007 SMC Group injected capital into BoC for 34% stake
2008 - 2012
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
Orderly disposal of structured notes
Management overhaul and workforce rationalisation
Embarked on IT transformation programme
Present
Healthy capital position with CAR of 23%
Low LDR (~45%) as SMC has been focusing on cleaning up the bank and exploring options for a
partner to manage the bank
15
Comparative Analysis
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 =
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
Total Assets, Total Deposits and Net Loans1
Branch Network2 Capital Adequacy Ratio1
(PHP ‘bil)
0
200
400
600
800
1,000
1,200
BDO Metrobank BPI Land Bank
Dev Bank PNB RCBC Union Bank
Citibank CBC Security Bank
UCPB HSBC Allied Bank
Phil Trust BoC
Total Assets Total Deposits Total Loans
Average CAR3
= 16.5%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%
BD
O
Metr
obank
BP
I
Land B
ank
Dev B
ank
PN
B
RC
BC
Unio
n B
ank
Citib
ank
CB
C
Security
Bank
UC
PB
HS
BC
Alli
ed
Ba
nk
Ph
il T
rust
BoC
Tier 1 CAR CAR
Average Tier 1
CAR3 = 14.3%
Market Share: Total Assets 1.5%; Total Deposits: 1.6%, Net Loans: 1.5%
#16
812 785744
387334 327 315 293
219 189122
BP
I
Metr
obank
BD
O
RC
BC
PN
B
La
nd B
an
k
Alli
ed B
ank
CB
C
UC
PB
Unio
n B
ank
Bo
C
16
BoC Indicators (1)
Profitability Deposits Gross Loans
NIM Asset Quality Total CAR and Tier 1 CAR
PHP ‘bil PHP ‘bil
ROE
Net
Profit
PHP ‘bil
(1,714.6)
617.3 639.3 579.9
2008 2009 2010 2011
-56.0%
13.6% 7.0% 3.9%
4.7%
3.7% 3.5% 3.6%
2008 2009 2010 2011
10.7%
15.6%16.8%
23.1%
7.2%
12.8%
16.3%
23.1%
2008 2009 2010 2011
Total CAR Tier 1 CAR
77.9
86.8 87.2
71.8
2008 2009 2010 2011
22.9%25.1%
9.9%
14.3%
2008 2009 2010 2011
39.9%49.7%
180.1%
78.1%
65.3%
88.8%
39.9%49.7%
78.1%
10.8%8.2%
9.9%
14.3%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
2006 2007 2008 2009 2010 2011
Allowance Coverage Net Impaired Loans ratio
39.9%49.7%
180.1%
81.9%
15.1% 14.4%
-9.6%
2.9%
39.236.4
31.5 32.6
2008 2009 2010 2011
17
BoC Indicators (2)
LD Ratio CI Ratio
Low LDR ~ 45% as BoC has not pursued
aggressive loan growth
Corporate and SME loans comprise ~95% of total
loan book
Significant growth potential to expand its retail loan
portfolio
Higher CI Ratio for Philippines banks relative to
other ASEAN banks due to:
Continued reliance on counter service in
branches
Under developed IT infrastructure to enhance
operations efficiency
50.0%
41.9%
36.1%
45.4%
68.0%66.5%
62.6%
68.4%
2008 2009 2010 2011
BoC Industry
60.0%
62.0%
61.7%
63.9%
61.5%
62.8%
2009 2010 2011
BoC Industry
DETAILS OF ACQUISITION
Post Acquisition
Current Shareholding Structure
19
Acquisition Structure
BoC
Caritas Health
Shield *Others
San Miguel
Properties
39.35% 9.77% 9.86%
SMC Retirement
Plan
39.94%
Q-Tech Alliance
1.08%
Entities related to SMC Group (Total = 80.37%)
Note: * Health care provider with over 100 branch offices supported by 554 hospitals and clinics serving ~300,000 members
BoC
Caritas Health
Shield *Others
SMC Retirement
Plan
26.93% 9.77% 2.18%
CIMB Bank
59.98%
San Miguel
Properties
1.14%
20
Purchase Consideration and Valuations
RM ’mil
Purchase Consideration 881
59.98% book value 770
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
We will be acquiring:
A ready banking platform in the Philippines
Low LD ratio and high capital for growth
Collaboration with one of the largest
conglomerates in Philippines
21
Overview of SMC Group
Key
Businesses
2011
Revenue
(PHP ‘bil)
2010
Revenue
(PHP ‘bil)
Annual
growth
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%
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
SMC Group recently completed an investment in PAL
Holdings, the parent company of Philippine Airlines
Inc. and Air Philippines Corp
22
Overview of the Collaboration Agreement with SMC
Note:
1) Subject to the Bank’s approved licenses, service capabilities, as well as regulations of BSP and/or other Philippines regulatory agencies
CIMB to be the preferred banking services provider for the SMC ecosystem
Scope
1) Channeling/referral of wholesale and retail banking opportunities
2) SMC companies shall provide relevant information necessary to undertake credit
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
Entities/Subjects
SMC Group
Vendors/suppliers of the SMC Group
Dealers/sub-dealers of the SMC Group
Employees of the SMC Group and of
affiliate companies of SMC
Retail customers of the SMC Group
Products/Services
Loans and deposits
Transaction banking
Treasury
Investment banking
Securities services, e.g. trustee &
custodial services
Salary accounts
Housing loans
Car loans
Staff personal loans
Credit/debit cards
EFFECTS OF ACQUISITION
24
Proforma Financial Effects
31 Dec-11
(RM ’mil)Proforma
BoC
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
* Includes Islamic net financing income
25
Proforma Key Ratios
31 Dec-11 (%) ProformaIncrease /
(Decrease)
NIM 3.12 3.60 3.13 +0.01
Non-interest income / total
income34.4 33.8 34.4 -
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
Impact to Balance Sheet,
P&L & Key Ratios
Minimal impact to CIMB Group financials & 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
Impact
EPS & ROE accretive from 2013 onwards
Expect only 3-4 months consolidation for 2012
Proforma Financial Impact
26
BUSINESS PLAN
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
28
Initial Thoughts
Detailed Plan Being Formulated
Supported by CIMB Group’s UB platform
People
Leverage our product
experts, e.g.
Treasury, IB, retail
Systems / Platforms
Regional ATM link, CIMB
Clicks, 1Platform, etc
Products
CIMB Money Transfer, credit
cards, CIMB Preferred , etc
Branding / Marketing
Shared ASEAN branding
customised for local market
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 3 k 350 k 14.8 mil
29
Overview of Business Strategy for Philippines
Wholesale Banking
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
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
Retail Banking
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
partnerships to capture the vast cross-border remittance opportunities in the
Philippines
TIMELINE
31
Indicative Timeline
Details Indicative Timing
Signing of Definitive Agreements / Bursa Announcement 8 May 2012
Submission / application to regulatory authorities and any other relevant
partiesLate May 2012
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
FINAL REMARKS
33
In Summary
High Growth Potential Widen Platform Strong Partnership
Banking market still
underpenetrated
5th largest economy in ASEAN
with a stable growth rate
Stabilising political situation
Increasing trading links with
ASEAN
Increasing CIMB Group’s
presence in ASEAN to cover
99% of ASEAN population and
almost 100% of ASEAN GDP
Enhances our scale and
position to capture intra-ASEAN
flows
Leverage on SMC companies’
retail footprint to strengthen
BoC’s distribution capabilities
Tap into SMC’s >17,000
employee base for distribution
of retail banking products
Tap into SMC companies’
vendors and clients base
34
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
Final Remarks
35
THANK YOU