Fitch: Merged Banco de Oro, Equitable may take higher ratings

Fitch Ratings said the upcoming merger of Banco de Oro and Equitable PCI will create a superior bank compared to the pre-merged Equitable PCI in several aspects and will likely take on the higher individual rating of Banco de Oro. The merger is expected to be legally completed in the first quarter of 2007.

Banco de Oro has an individual rating of C/D and support rating of 3. Equitable PCI has an individual rating of D, support rating of 3 and a long-term foreign-currency issuer default rating of BB with stable outlook.

Through numerous acquisitions, Banco de Oro has grown rapidly over recent years to become one of the Philippines' major banks, the agency said. The bank's good management has ensured an ongoing adequate level of profitability and balance sheet strength, Fitch added. While the integration of its acquisitions has been smooth, the agency said the bank has not had the time to forge a profile or franchise commensurate with its size.

Equitable PCI, on the other hand, has long been one of the Philippines' major banks with a high-profile and has a well-respected and a well-rounded franchise with particular strengths in consumer finance and remittance services, Fitch said. Over recent years, however, it has been dogged by shareholder disputes that threatened to divert management's attention from the job at hand.

Profitability for the merged entity should improve given time through the realization of revenue synergies and cost rationalization, Fitch said, although in the short term this may be constrained by the incurrence of expenses related to the two banks' integration.

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