Japan's Mitsubishi UFJ invests $744 million in Philippine bank

Bank of Tokyo Mitsubishi UFJ is to invest nearly USD 774 million in the Philippines’ Security Bank, the Filipino lender said today in another sign of the Southeast Asian nation’s rising tiger economy status.

The transaction, still subject to regulatory approvals, would be the largest equity investment by a foreign lender in a Philippine bank, securities analysts in Manila told AFP.

A Philippine Stock Exchange disclosure by listed Security Bank said the 36.92 billion-peso (about USD 744 million) investment would buy the Japanese lender a 20-per cent stake in one of the Philippines’ bigger banks.

“They are looking to expand their horizons especially as returns on their domestic market are so low,” Jonathan Ravelas, chief market strategist for top Philippine lender BDO Unibank, told AFP.

“They see the big investment potential of the Philippines.”

The Philippine economy has been growing strongly since President Benigno Aquino came to power in 2010 vowing to root out widespread corruption that he said was responsible for turning the country into an Asian basket case.

Economic growth was likely 6.0 percent last year, according to the government.

And in contrast to Japan, the Philippines’ population is growing rapidly, recently surpassing 100 million people, offering the prospects of string demand over coming decades.

The Philippines loosened rules on foreign ownership of banks in 2014, and Aquino on Tuesday graced the opening ceremony of Sumitomo Mitsui’s first branch in the Philippines.

Aquino said five other foreign lenders had been granted operating licences, but did not name them.

Security Bank said Thursday it accepted Mitsubishi’s offer to buy 150.7 million new common shares at 245 pesos each and 200 million preferred shares at 0.10 peso each.

The bank’s shares closed at 135 pesos in Manila trading on Wednesday. Trading was suspended Thursday prior to the announcement.

Juan Rafael Supangco, research chief of local securities firm Angping and Associates Securities, said Mitsubishi paid a hefty premium for Security Bank, which he said was the fifth or sixth largest Filipino lender in asset terms.

“The Japanese tend to pay such a premium.... it’s more of a long-term transaction for Mitsubishi,” Supangco told AFP.

He said he expected more foreign players to invest in the Philippines financial sector.

“There is still a large part of the population that is unbanked. There’s a potential to beef up their asset base and deposit base. There is still a huge potential to get more customers,” Supangco said.