One of the more significant banking stories of the year is the acquisition of Bank of Tokyo Mitsubishi UFJ (BTMU) of a 20 percent share in a local bank. It’s a move that many predict will eventually lead to a larger ownership stake in the future.
BTMU CEO Go Watanabe (Asia and Oceania Region) is not dismissing this possibility but one thing he is sure, if it should come to pass it will be a decision that both banks will reach at the same time, at the right time.
WATANABE
Watanabe and officials of Security Bank Corp. announced in January this year of BTMU’s purchase of 20 percent of the bank for $782 million. BTMU, the investment banking arm of the Mitsubishi UFJ Financial Group, is Japan’s biggest bank while Security Bank is the sixth top bank in the Philippines.
“I cannot disclose the details of the contract but at this moment, 20 percent is very comfortable. So, at this moment we have no plan to increase our share,” said Watanabe.
The future though, is not set in stone. “(Do we want more share?) we don’t know yet,” he remarked. “Hopefully, our collaboration has been successfully expanding and if both sides will see further opportunity to change the ownership … in that case, we might think about it.”
Watanabe said BTMU’s “purpose” in Security Bank is not just about making an investment. “We don’t have to limit ourselves to 20 percent as a collaboration. We have already started at 100 percent collaboration.”
Watanabe said they value mutual agreements and their relationship with the owners of Security Bank and its management is “much more important”. “Due to the good relationship, I think if Security Bank or its owners will reduce their share (in the future), BTMU will be the best party to talk first.”
Bigger market share
BTMU is an ambitious bank, it wants global banking status soon and sees the Philippines as part of its plan of establishing a larger regional presence first before becoming one of Asia’s largest by 2020.
For the Japanese bank, the Philippines is a high growth market based on sustained GDP expansion (66 quarters of above five percent growth), a developing infrastructure industry, a promising revival of the manufacturing sector, and a demographics profile that assures a tenable growth path for a long time.
BTMU, in the Philippines since 1918, has one branch which they established in the 1970s.
Watanabe said they have a strong client base here mostly Japanese corporations but their local clients are also growing. “We also have been working with a number of big deals with local conglomerates.” In 2015, its loan book in the Philippines amounted to $800 million.
BTMU has been in business with Security Bank since 2011 as the latter has an expertise in cash management segment. When they bought shares in the bank – which was approved by the central bank in February this year – they quickly installed their representatives in the bank.
During its recent annual stockholders’ meeting, and after ratifying the 20 percent equity infusion of BTMU, the Security Bank’s board elected three representatives from BTMU. One of them, Takahiro Onishi, is appointed executive vice president and head of alliance segment. This segment is a new position for exploring “opportunities for the growth of Japanese and related businesses for Security Bank.”
Watanabe said the collaboration involves providing existing Japanese customers in the Philippines with services such as retail banking. “In addition, we can also provide global corporate business to local companies with services such as project finance, trade finance and tapping BTMU’s diversified global network.”
“Our business collaboration is (mainly) based on corporate banking. We will be using Security Bank’s expertise in cash management for our Japanese clients (for payroll service, among others),” explained Watanabe.
In BTMU’s current set up in the country it does not have retail banking. It is in this area that Security Bank will come in. “We are willing to collaborate, to walk together, to transfer our knowledge and support Security Bank’s retail banking.”
And, since the Philippines is one of the “most important country” for BTMU’s plans to become a top Tier 1 bank in the region, Watanabe said they did not purchase their shares cheap, even offering a high premium. “Our investment is the biggest investment in the Philippine financial market,” he said.