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 16 th 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 6 Source: IMF statistics
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 financial crisis, with more robust and Praise the Aquino government for less variable growth starting “ reforms to address long- 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 Within ASEAN, MIST are the largest trading 21.1% partners of the Philippines Others 20.0% Malaysia 6% 22.8 % of Total 16% Philippines Trade Thailand 23% Indonesia 12% 21.2 Philippines- ASEAN Trade (USD ‘bil) Singapore 43% 2008 2011 Philippines-ASEAN Remittance SG and Malaysia are the top 2 ASEAN countries 4.7% sending remittance to the Philippines 3.8% % of Total Others 944.7 Thailand Philippines 1% 1% Malaysia Remittance 13% Indonesia 620.5 2% Philippines- ASEAN Remittance (USD ‘mil) Singapore 84% 2008 2011 Source: Philippines National Statistical Office 8 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 Overall Competitiveness Index Ranking Corruption 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 9 2) World Economic Forum - Competitiveness Index
However Unemployment Rates and FDIs Remain An Issue FDI from 2007 to 2010 (USD ‘bil) Unemployment (%) 9.1 8.4 99.5 Singapore 7.9 7.5 7.5 7.4 7.3 7.2 6.6 7.4 Indonesia 34.4 6.3 7.1 4.7 4.6 4.6 Vietnam 31.8 4.4 4.1 4.1 3.7 3.3 3.3 3.2 3.2 3.0 Thailand 31.1 2.3 2.2 2.2 2.1 3.0 2.1 Malaysia 26.5 1.4 1.4 1.4 1.3 1.3 1.1 2007 2008 2009 2010 2011 E 2012F 8.1 Phillipines Malaysia Indonesia Singapore Thailand Phillipines Vietnam Source: BSP statistics 10 10
Philippines Banking Sector Has Yet To Take-Off Net Loans 1 Total Deposits Total Assets PHP ‘bil PHP ‘bil PHP ‘bil CAGR 8.1% CAGR 6.9% CAGR 8.5% 7,038 6,918 5,125 5,036 3,201 6,192 4,672 2,908 5,676 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 USD ‘bil CAGR 7.6% CAGR 13.7% 20.1 21% 22% 23% 23% 518 473 18.8 413 21% 23% 23% 26% 363 17.3 16.4 39% 38% 37% 35% 18% 19% 17% 16% 2008 2009 2010 Sep-11 2008 2009 2010 Sep-11 2008 2009 2010 2011 Demand Savings Time Foreign Mortgage Credit Card Auto Others 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 12
OVERVIEW OF BOC
Overview of BoC 122 branches 300 ATMs 1,662 employees ~350k customers 16 th 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 SMC Group injected further capital into BoC and gradually increase its stake to 80.37% 00 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 Loans 1 (PHP ‘bil) Market Share: Total Assets 1.5%; Total Deposits: 1.6%, Net Loans: 1.5% 1,200 1,000 800 #16 600 400 200 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 Capital Adequacy Ratio 1 Branch Network 2 Tier 1 CAR CAR 24% 812 785 22% 744 20% 18% Average CAR 3 = 16.5% 16% 387 Average Tier 1 14% 334 327 CAR 3 = 14.3% 315 293 12% 219 189 10% 122 8% 6% BPI Metrobank BDO RCBC PNB Land Bank Allied Bank CBC UCPB Union Bank BoC Allied Bank Phil Trust BDO Metrobank BPI Land Bank Dev Bank PNB RCBC Union Bank Citibank CBC Security Bank UCPB HSBC BoC 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% 87.2 86.8 -56.0% ROE 77.9 71.8 Net 639.3 617.3 579.9 Profit 39.2 PHP ‘bil 36.4 32.6 31.5 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% 81.9% 49.7% 23.1% 39.9% 4.7% 23.1% 16.8% 15.1% 14.4% 15.6% 3.7% 3.6% 3.5% 2.9% 10.7% 16.3% 12.8% 7.2% -9.6% 2008 2009 2010 2011 2008 2009 2010 2011 2008 2009 2010 2011 Total CAR Tier 1 CAR Allowance Coverage Net Impaired Loans ratio 16
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