East West Banking Corp (EWBC), a medium-sized commercial bank in the Philippines, yesterday launched the institutional roadshow and bookbuilding for an initial public offering of between Ps4.5 billion and Ps5.8 billion ($106 million to $135 million).
The deal comes hot on the heels of a well-received IPO for conglomerate GT Capital, which will be the first Philippine listing this year when it starts trading on April 20 and the largest in more than a year. Last week, GT Capital fixed the IPO price at the top half of the range after its international tranche was more than five times oversubscribed, resulting in a total deal size of $438 million.
A continued bullish run by the local market, which hit a record high more than 10 times in the first quarter, may also boost investor sentiment. The benchmark PSEi index is currently up about 15% this year, making the Philippines the best performing market in Asia.
EWBC, which provides banking services to retail and mid-market corporate customers under the name of EastWest Bank, has set a price range between Ps18.50 and Ps23.50 per share. The deal comprises 245.3 million shares, of which 57.5% are new. The remaining 42.5% are offered by existing shareholder Filinvest Development Corp (FDC).
EWBC is wholly owned by FDC, which incorporated the bank in 1994 to diversify its business interests, according to the FDC website. FDC has evolved from businesses established by Andrew L Gotianun Senior since 1955 and now coordinates several administrative functions on behalf of its subsidiaries, including project development, financing, the evaluation of potential acquisitions by its constituent companies, land acquisition and construction services.
The base deal accounts for 21.7% of the enlarged share capital. There is also a 15% greenshoe, made up of all secondary shares, which could increase the total proceeds to as much as $154 million.
Of the base deal, 70% is targeted at domestic and international institutions, while 20% will be set aside for Philippine brokers and their high-net worth, private clients. The remaining 10% is for retail investors, a source said.
The price range values the company at a 2012 price-to-book (P/B) ratio of between 1.2 times and 1.48 times, the source said. That places it at a discount to its key comparables, such as Security Bank, which is trading at a 2012 P/B multiple of 2 times.
EWBC plans to use the net proceeds to pay for bank branch licensees, to expand its branch network and to implement IT infrastructure, the company said in a preliminary prospectus filed with the Philippine Stock Exchange in late March.
It plans to open at least 100 branches in 2012 to aggressively increase its branch network by capitalising on its newly acquired licenses. It is selectively focusing on potentially profitable locations in restricted areas and urban areas outside Luzon. As of February 2012, the bank had a network of 144 branches, including 92 branches located in Metro Manila, up from 113 branches as of December 31, 2010.
The bank said it will continue to consider further expansion through potential strategic acquisitions alongside its organic growth.
The bank’s principal banking products and services include consumer loans, deposit products, corporate banking, treasury and trust products and cash management solutions, according to the preliminary prospectus. For the fourth quarter of 2011, EWBC ranked sixth among the Philippines’ 12 major credit card issuers in terms of credit card receivables, the bank said, citing an industry survey conducted by Credit Cards Association of the Philippines.
Earnings have been rather flat in recent years, however. In 2011, EWBC generated Ps7.3 billion of total operating income and Ps1.7 billion of net income. That compares with Ps7.4 billion of total operating income and Ps1.8 billion of net income in 2010, according to the preliminary prospectus.
According to the current timetable, the deal is expected to price on April 18. The retail offering period will run from April 20 to 26. The listing is scheduled for May 7.
Deutsche Bank and J.P. Morgan are joint bookrunners and international lead managers, while Unicapital will handle the domestic portion of the deal.
