Excessive Competition
According to foreign media reports and investment banking industry sources on July 2, Shinhan Bank and KB Kookmin Bank have participated in the sale deal of 20 percent share of EastWest Bank in the Philippines.
Goldman Sachs, the lead manager for the sale of EastWest Bank, selected three banks – Shinhan Bank, KB Kookmin Bank and a smaller bank in Japan – as the short list through a preliminary bid last month and it will choose a preferred bidder in August.
It is the first time for Shinhan Bank and KB Kookmin Bank to compete to acquire the same deal in other countries. EastWest Bank, the 13th largest lender by assets in the Philippines, currently has 446 branches and handles both consumer banking services such as savings and transactional accounts, personal loans, debit and credit cards, and corporate banking services.
As the news that Shinhan Bank and KB Kookmin Bank took part in the takeover deal came out, the stock price of EastWest Bank has been skyrocketing, which leads to the increase of selling prices. EastWest Bank was traded at 20 peso per share in the Philippine stock market in April just before the news was released. However, the stock price of EastWest Bank rose to 29 peso as of the end of last week, up nearly 50 percent in two months. This was the highest price in three years after it hit 30 peso in May 2014.
As a result, EastWest Bank saw its market capitalization jump to 43.8 billion peso (US$867.39 million or 1 trillion won). The sale price of its 20 percent share stands at 200 billion won (US$174.02 million) but it can reach 300 billion won (US$261.05 million) including premiums requested by the bank. Some experts said that the bank can delay the final bidding schedule from July to August due to the rosy expectations that the stock price can rise even further. In this case, the final sale price can reach some 400 billion won (US$348.07 million).
In this regard, critics in the domestic investment banking industry said that South Korea’s two biggest banks have been excessively competing to acquire the mid-size bank even though they cannot have the right of management, raising the price of the local bank in vain.