DBS agrees to sell half of its shares in a large Philippine bank

Check out what's the next move for DBS.

DBS has agreed to sell part of its  20.3% stake (10.4%) in The Bank of the Philippine Islands (BPI) to Ayala Corp, Philippines’ oldest and largest conglomerate with businesses in real estate, financial services and telcos etc.

Total cash consideration will be  S$757.3m and DBS will recognise a gain of S$450m from the transaction.

Following its divestment, DBS will  retain a 9.9% interest in the bank and continue to have board representation.

According to CIMB, DBS’s partial stake divestment of BPI to Ayala Corp could be a move to boost its capital in preparation for its Danamon acquisition.

Here's more from DBS:

This could be a move to boost its balance sheet in preparation for its acquisition of Danamon in Indonesia. In recent months, we have been  seeing consolidation in the financial industry in the region, as financial institutions attempt to build a pan-ASEAN/Asian presence.

We think there is scope for more consolidation as potentially weak equity markets could throw up acquisition opportunities. While banks’ funding could be constrained by tougher capital requirements under Basel III, Singapore banks, with one of the strongest capital buffers in the region, could be in a better position to take advantage of the opportunities.