TPG buys stake in Philippines rural bank

ONB is based in Davao and has more than 100 branches and offices. Formed in 2004 through the consolidation of Rural Bank of Panabo, Network Rural Bank, and Provident Rural Bank of Cotabato, it claims to be the country's largest rural bank by resources, net capital, net income and branch network. BDO bought the business in July 2015, with the sellers receiving BDO stock worth around PHP6.68 billion ($144 million) by the time the deal closed.

ONB generated income of PHP1.2 billion in 2015, the vast majority of which came from net interest income, compared to PHP1.12 billion the previous year. Its loan book was worth PHP20.5 billion out of total assets of PHP25.6 billion. Net profit reached PHP398.6 million in 2015, down from PHP461.8 million in 2014.

"We look forward to working with TPG to accelerate ONB's expansion and to develop new products to cover the underserved market segments," said Nestor V. Tan, president and CEO of BDO, which will retain a 60% interest in ONB. "Through this partnership, ONB will benefit from TPG's global experience in financial services, especially in developing markets."

Controlled by SM Group, one of the Philippines' largest conglomerates with interests spanning retail, real estate, tourism and financial services, BDO has more than 1,000 branches and over 3,000 ATMs nationwide. It had PHP2 trillion in assets as of year-end 2015, while net profit came to PHP25 billion.

There have only been two other PE investments of reasonable size in Philippines banks in recent years. CVC Capital Partners paid around $115 million for a 15% stake in Rizal Commercial Banking Corporation in 2011 and sold the bulk of its holding three years later, as Cathay Life Insurance bought a 20% interest in the lender for $400 million. Meanwhile, Northstar Group remains an investor in Philippine Bank of Communications.

TPG Growth, which is currently investing its third global fund of $3 billion, covers a broad range of industries with a significant focus on large emerging markets. Elsewhere in Southeast Asia, it has backed Apollo Towers and Myanmar Distillery Company Group in Myanmar, and feed manufacturer Proconco and conglomerate Masan Group in Vietnam.

The ONB deal is subject to regulatory approval.

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• Topics
• Southeast Asia
• Financials
• Expansion
• Growth capital
• TPG Capital
• Philippines