January 21, 2014

LTG increases stake in PNB to ~60%

Philippine National Bank (PNB, Buy) yesterday disclosed that its parent, LT Group (LTG, Not rated) has acquired additional indirect ownership of PNB through 10 companies that own PNB shares. This brought LTG's indirect voting control of PNB from 48.6% to 59.9%.

Our Take: LTG's latest move has solidified its control of PNB and this can further enhance its investment portfolio given the bank’s ongoing measures to strengthen its balance sheet. The move also gives LTG more command in steering the strategic direction of PNB. This controlling stake will be further cemented when LTG subscribes to the upcoming P11.6b stock rights offering of PNB.

LTG's control over PNB may facilitate the sale of PNB's investment properties (which stood at P18.7b as of 3Q13) potentially to Eton Properties, the property arm of the LT Group. This will allow PNB to unlock the value of its repossessed properties and give its balance sheet more room for loan growth. We also expect growing synergies between Eton and PNB. The sale of these assets to Eton can support its land banking and development plans. Meanwhile PNB can tap into buyers of Eton’s projects as market for its loan products. – WealthSec