ING acquisition was a no-brainer, says BPI AM

Bank of the Philippine Islands (BPI) has cited outstanding investment performance and strong equity management capability as two key factors behind its recent purchase of ING’s trust and investment management business in the country.

Maria Theresa Javier, group head and trust officer of BPI Asset Management, describes the deal as a strategic move to strengthen its domestic industry position, seizing the chance to combine its 800-branch distribution network with a strong foreign asset management franchise.

“It was a tactical move because the opportunity was there,” she tells AsianInvestor. “This was a rare opportunity. It’s probably once in a decade that you will see a foreign asset management franchise being sold.”

She declined to disclose financial details of the transaction or discuss the bidding process, saying only: “I think we are paying what we think is the right value for the franchise.”

But she did reveal that BPI AM currently has about 70,000 institutional and retail customers, and that absorbing ING IM would increase that by at least 10%.

Javier is hopeful that the transaction can be completed within a couple of months, although it could take up to a year. Integration will happen immediately afterwards, and she confirms that BPI plans to absorb all of ING IM’s more than 40 staff, taking its total to more than 220.

She adds that all ING products will be rebranded, and the existing line of ING products will continue to be managed by the same team.

BPI already has the second largest asset management franchise in the country at Ps458 billion ($10.4 billion) as of September 30 this year. Adding ING IM’s Ps78 billion will take its tally just shy of BDO Asset Management’s Ps540 billion in AUM.

Prior to the acquisition, BPI AM had a domestic market share of 22%, while ING IM was at 3.9%. Integration would therefore bring it exactly level with BDO AM’s 25.9%.

Javier notes that preserving ING IM’s value proposition for customers will be the priority post-integration. “They are quite strong in terms of their equity portfolio management capability and their funds are among the top quartile in their respective sectors,” she explains.

“They are also well known in terms of delivering superior investment performance with their products, and that was one of the major reasons behind this purchase.”

She was also quick to talk up a domestic asset management industry that has been growing at between 15% and 20% CAGR, and says she expects a pick-up in investments given the country’s roaring equity market (the stock exchange is up 36% in 2010) and low domestic interest rates.

“Rapid wealth creation is happening, not just in the Philippines but in the rest of Asia. We expect that to be sustained over a long period, with demand for investment products continuing to rise.

“The rising middle class in the Philippines, because of its increasing ability to save, invest and build wealth, is on an upward momentum. There is still a lot of potential in terms of tapping the domestic customer base.”

She points out that the focus of the domestic population is still initially on consumer durables, particularly housing and automobiles – which has led to a vibrant consumer lending market.

But she adds: “It is the next stage that they start to think about investments. It’s just a matter of time, but we are expecting to see more interest in investments as household wealth moves up further.”