AIG sells local banking unit to East West Bank

MANILA, Philippines - Beleaguered financial conglomerate American International Group, Inc. (AIG) has sold its Philippine consumer banking arm to mid-sized commercial bank East West Banking Corp., marking the first in a series of deals involving the divestment of its local businesses. Officials of both firms yesterday announced they have sealed an agreement for East West’s takeover of AIG PhilAm Savings Bank, Inc., an indirect subsidiary of New York-based AIG. Philam Savings is 45 percent owned by AIG Consumer Finance Group and 45 percent by the Philippine American Life and General Insurance Co. (Philamlife), the country’s largest insurer, which were also both signatories to the sale transaction. The agreement also included East West’s purchase of Philam Auto Finance & Leasing, Inc. and PFL Holdings, Inc. — both owned by AIG Philam Savings Bank. The two firms were held by Ford Credit International, Inc. until AIG’s local thrift bank bought them in December 2007. “This is the first transaction in a series we’ll do in the next months," Sabby Ray, chief executive officer of AIG Consumer Finance Group, told reporters yesterday in a briefing. AIG has put most of its so-called “crown jewels" in Asia for sale to repay an $85-billion lifeline extended by the US government last year, when storied American financial institutions succumbed to a credit crunch. AIG’s wholly-controlled Philamlife and its subsidiaries, which are also all up for grabs, will be sold as a block, Philamlife President and Chief Executive Officer Jose L. Cuisia, Jr. said. In a separate interview, Mr. Cuisia said Philam Insurance, Philamlife’s wholly-owned non-life insurance affiliate, would be spared from the sell-off. The non-life subsidiary will be folded in American International Underwriters (AIU), which manages AIG’s overseas property-casualty operations, he said. “It’s [Philamlife and its affiliates] being sold as a whole, except the bank [Philam Savings which East West purchased] and non-life company that’s sold to AIU, which is part of AIG," Mr. Cuisia said in a separate interview, adding that the block sale should be made this year. Philamlife has at least eight subsidiaries that are in the business of pre-need plans, bancassurance, healthcare, banking, credit cards, asset management, property and casualty insurance, property management and development, and business process outsourcing. Next: Acquisition boosts East West bank Acquisition boosts East West bank East West’s purchase of PhilAm Savings Bank would allow it to go at least a notch up in terms of assets now at a combined P63 billion, East West Bank President and CEO Antonio C. Moncupa, Jr. told reporters. East West, which is backed by real estate industry stalwart Filinvest Group of the Gotianun family, currently is the country’s 19th largest commercial bank in terms of assets, he said. The acquisition will strengthen East West’s foothold in the consumer banking business. East West will become the sixth largest credit card issuer in the Philippines, whose 80-strong branch network will grow by nine more branches from the AIG thrift bank, Mr. Moncupa said. Officials declined to divulge the tag price for the deal, citing a non-disclosure agreement being enforced by AIG. PhilAm Savings Bank had a book value of P1.3 billion as of end-September 2008, according to published financial statements. “The price paid by East West is a reasonable price," Mr. Cuisia said without elaborating. “We are pleased with the bid process and believe the outcome serves the best interests of all parties." The transaction should be closed by the second quarter of this year as it awaits regulatory approval, officials said. Mr. Moncupa said East West has enough room “to absorb" the employees of PhilAm Savings Bank. The latter’s management team awaits cue from East West on how the transition process will go, Philam Savings Bank President and CEO Joven D. Reyes said. - Maria Eloisa I. Calderon, BusinessWorld