PSE Circular for Brokers No. 1181-99

May 25, 1999 PSE CIRCULAR FOR BROKERS NO. 1181-99 May 24, 1999 Philippine Stock Exchange PSE Center, Exchange Road Ortigas Center, Pasig City Attention: Ms . Janet Alcala Analyst Gentlemen : This refers to your fax dated May 24, referring to a news article "Metrobank shifts merger sights on Prudential." We wish to reiterate what we earlier mentioned in our 21 April letter to the PSE that "we would like to make it clear that if any of the good banks are up for sale, we will take the opportunity to consider an acquisition for strategic reasons." LLpr The statement of our President that "we are just looking at it" falls under this general statement. We hope this will clarify matters and all future statements made in a similar context. Very truly yours, (SGD.) ALFREDO P. JAVELLANA II SVP/Controller Metrobank shifts merger sights on Prudential By REENA J. VILLAMOR Reporter After losing out to Equitable Banking Corp. in its bid for 72% of Philippine Commercial International Bank (PCIBank). Metropolitan Bank and Trust Co. (Metrobank). the largest local bank in the country, is setting its sights on another bank for a possible merger. Metrobank president Antonio S. Abacan, Jr. said Metrobank is looking at Prudential Bank, which is in the process of merging with commercial bank affiliate Pilipinas Bank. LibLex "We are just looking at it," Mr. Abacan said in the vernacular during the Ty-Tan pre-nuptial dinner last Friday, when asked if Metrobank is interested in Prudential Bank. In a separate interview, Pilipinas Bank executive vice-president and chief operating officer Santiago S. Syjuco III said two local banks, one of which is Chinese and two foreign banks, one of which is European, have expressed interest in the merged Prudential Bank and Pilipinas Bank. Mr. Syruco said the heightened interest was an offshoot of the Equitable Bank PCIBank deal. Their main concern at present, however, is the completion of the integration process of Prudential Bank and Pilipinas Bank, he said. "After that, the owners will be in a position to consider other options, "he said. The merger, from which Prudential Bank will be the surviving bank, is expected to be finalized between August and September this year, he added. aisadc The marriage of the two banks was the first to be approved by the Bangko Sentral after capital requirements were raised to protect the banking system against external shocks. The Bank of Tokyo-Mitsubishi, which owns 10% of Prudential Bank and 30% of Pilipinas Bank, will have a 16% to 20% stake in the new bank, Mr. Syjuco earlier said. The Santos family, majority stockholder of the two banks, will end up with more than 60% holdings. Mr. Syjuco said based on the due diligence which will be completed by auditing firm SyCip, Gorres & Velayo in two weeks, the combined capital of the two banks will be an estimated P7.5 billion. Bad loans have already been deducted from the figure, he added. If a bank acquires the surviving Prudential Bank at 1.8 more than its book value or capital similar to Equitable Bank 's P31.8 billion purchase of PCIBank, minus a due diligence the bank would have to shell out P13.5 billion, computations show. With the merged bank's 190 branch network, the cost per branch would then he P71.053 million. This would be 37% cheaper than the P112.367 million per branch Equitable Bank and its partners would in effect he paying for PCIBank's 283 branch network. Mr. Syjuco said some of the Pilipinas Bank branches are strategically located in export-processing zones. Pilipinas Bank has cornered 50 % of the Japanese market, he added.