“The giant conglomerate has a new financial arm.”
San Miguel Corporation President Ramon S. Ang is building a new financial behemoth to backstop the diversified conglomerate’s vast operations and fund future growth. SMC is the Philippines’ largest conglomerate in assets, revenues, and diversity of operations. In 2021, SMC is estimated to have chalked up revenues of P940 billion.
SMC’s new financial arm is the Bank of Commerce, a 59-year-old commercial bank that used to be owned by Jose Cojuangco Sr., the father of the late President Corazon Cojuangco Aquino.
SMC has acquired 84.52 percent of BankCom—39.89 percent through San Miguel Properties, Inc.; 38.54 percent through the SMC Retirement Plan, and 21.57 percent through the SMC Equivest Corp.
BankCom is conducting an initial public offering this March to raise P3.5 billion. Plus the P5.5 billion recent capital infusion from SMC Equivest, the bank will have P9 in fresh equity as it tries to go big time.
The Bangko Sentral recently granted BankCom its universal banking (UB) license, giving it flexibility in its operations and branch banking.
The UB license, says leading investment bank BDO Capital “would allow the bank to broaden its suite of products and services and achieve sustainable growth across its business segments. The bank will also have more opportunities to generate fee-based income, as well as engage in investment banking and bancassurance activities.”
Previously, SMC had wanted to develop United Coconut Planters Bank (UCPB) as its financial arm. But the government sequestered it and now wants it merged with another government bank, Land Bank.
So RSA has to grow another bank—BankCom. Major Philippine conglomerates own banks.
A P9-billion in fresh capital can be geared 8x, enabling BankCom to extend up to P72 billion in fresh lending. In September 2021, BankCom had P72 billion in customer loans alone.
With total networth of P23 billion as of end-September 2021, BankCom is 11th largest among the private domestic banks (excluding the three government-owned banks) in equity. It is the 13th biggest in assets (P195 billion as of end-September 2021) and in total deposits (P167 billion), among the local banks.
BankCom has a capital adequacy ratio (CAR) of 21 percent, better than the CAR of the Top Ten Banks. The CAR of the biggest banks: 1) BDO 14.87 percent; 2) Land Bank 17.36 percent; 3) Metrobank 20.66 percent; 4) Bank of PI 17.64 percent; 5) PNB 14.32 percent; 6) DBP 14.86 percent; 7) Chinabnk 15.30 percent; 8) RCBC 15.15 percent; 9) Union Bank 18.28 percent; and 10) Security Bank 20.10 percent.
In terms of capital, thus, BankCom is the strongest among the top-tier banks.
In terms of bad loans, BankCom is just fine. Its NPL (non-performing loan) ratio is 3 percent. Compare that with the 2.8 percent of Chinabank, 3 percent of BDO, 3.4 percent of LandBank, 4.2 percent of both Union and Security, the 5.2 percent of RCBC, 6.7 percent of DBP, and the whopping 10.7 percent of PNB. Two banks have negligible NPL—Metrobank 1.3 percent, and Bank of PI 1.6 percent.
Improving the quality of BankCom’s net worth and loan portfolio indicates Ramon Ang’s seriousness to make the bank one of the biggest and best in the industry. Quickly, but still adhering to prudential rules of banking.
BankCom has three main strategies to power its growth—one, make use of the San Miguel group’s vast network and ecosystem; two, use the latest in IT; and three, render the best in service.
BankCom has adopted “We Think Customers” as its slogan. It calls its branches, 140 so far, “Malasakit Centers.”
BDO Securities sees a boom in banking.
“Sustained reopening and recovery of the economy is expected to drive demand for bank services,” says BDO Securities in analyzing BankCom’s IPO.
“The latest BSP survey showed that consumer and business sentiment appear to be improving, with respondents more optimistic for 1Q22 and the next 12 months. Businesses cited improving demand and sales, and some firms are now looking to expand operations and hire more. Consumers, on the other hand, are anticipating the availability of more jobs and better income. So far, industry loan growth has been improving for the past five months (4.6 percent/4.3/3.5/2.7/1.3 percent in Dec 2021/Nov 2021/Oct 2021/Sep 2021/Aug 2021), and we expect the uptrend in bank lending to continue, tracking GDP growth in the subsequent quarters.”
BDO Securities projects operating revenues and attributable net income to grow by an average of 7.1 percent and 38.5 percent, respectively, from FY2020 to FY2023, on the back of steady increases in lending and service transaction volumes as BankCom transitions into a full-service universal bank. Increasing scale and improving operating efficiencies are also expected to gradually lift the bank’s ROE from 4.8 percent in FY20A to potentially 6.8 percent/8.6 percent by FY22F/FY23F.
SMC is the Philippines’ largest corporation in revenues and assets. Sales are 5 percent of GDP, the country’s value of economic production. SMC has more than 100 factories and factories in the Asia Pacific. Its SanMig is one of the best and best-selling beers in the world.
SMC has five major businesses—nearly all market leaders: Food and beverage, packaging, fuel and oil, energy, and infrastructure. SMC has investments in other businesses such as property development and leasing, cement, car distributorship, and now, banking services.
SMC says it has a portfolio of companies that is interwoven into the economic fabric of the Philippines, benefiting from, as well as contributing to, the development and economic progress of the nation.
SMC products include beer, spirits, non-alcoholic beverages, poultry, animal feeds, flour, fresh and processed meats, dairy products, coffee, various packaging products, and a full range of refined petroleum products, most of which are leaders in their respective markets. In addition, SMC contributes to the growth of downstream industries and sustains a network of hundreds of third-party suppliers.
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