Fil C. Sionil A couple of years ago, the national government broached the idea of merging Land Bank of the Philippines and United Coconut Planters Bank (UCPB). However, the plan, for whatever reason, did not materialize. Now, the planned union of the two lenders is back. Finance Secretary Carlos “Sonny” Dominguez Tuesday disclosed putting on hold any move to sell UCPB. This is the nth time the National Government (NG) has placed in the back burner the privatization of UCPB, which was primarily created to service the needs of coconut farmers. It’s highly likely that this second attempt to marry LandBank and UCPB will happen. Secretary Dominguez has already communicated this to the Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas (BSP) of which he is a member. The merger would be a cost-saving path for the national government to take rather than infusing additional equity, again, into UCPB. The BSP in its annual examination found the bank to be undercapitalized. Government’s total capital infusion in UCPB, including the financial assistance of the Philippine Deposit Insurance Corporation, stands at P42 billion. A cost benefit analysis undertaken by the Finance Department showed the National Government stands to have a paper gain as the value of its P42-billion equity may go up to as low of P60 billion to as high as P100 billion. Another option is to place UCPB on the auction block. While Secretary Dominguez Sonny said this move is put on hold, he also said that “there are many other alternatives than privatization.” It could mean entertaining unsolicited proposal from a white knight. However, the entry of a white knight may be a bit complicated due to the ownership structure of UCPB. Just a bit of history: UCPB started operations on May 15, 1963, under the name First United Bank (Philippines), a commercial bank owned by Jose “Don Pepe” Cojuangco, with four branches. In July, 1975, under Presidential Decree (PD) 775, President Marcos ordered the Philippine Coconut Authority (PCA) to "formulate and recommend for adoption credit policies affecting production, marketing, and processing of coconut and other palm oils" and "to provide readily available credit facilities to the coconut farmers at preferential rates." The PCA, headed by Juan Ponce Enrile, bought the majority shares, 72.2 percent of First United owned by Don Pepe, father of the late President Corazon C. Aquino and uncle of industrialist Eduardo “Danding” Cojuangco Jr. First United Bank was renamed Coconut Planters Bank or Cocobank and has evolved to what it is known today as UCPB, a unibank with 188 branches and 279 ATMs nationwide. The ownership structure has to be addressed to attract prospective investors or buyers. Unless, NG imposes a conditionality of caveat emptor or buyer beware. I heard that prior to the ressurrection of the merger plan, a businessman from down South had his eyes on UCPB but the move fizzled out. Of late, there’s another prospective white knight. Thus, merger is the better option. “We’re done with the due diligence. Now, we’re in the phase of discussing the details, the fine print of the merger,” shared a source privy to the on-going preparation. These include reorganization of the staffing pattern, the review and the rationalization of the networks of both lenders, some of which may have to be closed because of their proximity to each other. Offhand, LandBank is being considered as the surviving entity. A seasoned banker who had the opportunity to steer both lenders (at first, LandBank and later on UCPB) said LandBank is “in a better position” to absorb the finances of UCPB. Will the business wheel turn, this second time around, to a successful union of the two institutions? The BSP is all for it. “We’re getting there.” The marriage ceremony for UCPB and LandBank is most likely to happen in 2020. Talkback to me at [email protected]