DBS

DBS: Bank of the Philippine Islands (BPI) is in merger talks with Philippine Nat’l Bank and Allied Banking Corp (both of which are already in process of merging), on a deal that could create Philippine's largest bank. Allied Bank's strength lies in the Chinese market and PNB niche is with the govt, while BPI has the corporate and consumer base. Merger of the 3 will have combined assets of 1.2t pesos or $35.7b. DBS currently has a 9.9% stake in BPI. Meantime, DBS US$6.85b bid for Danamon remains stuck in limbo as the bank awaits regulatory approval. While new rules governing ownership of Indonesian lenders offer DBS a path to full control, Danamon's share price closed 15% below the bid yesterday, suggesting little market faith in this transaction being closed. Indonesia's central bank is pushing for more access for its own lenders in Spore, a request MAS will not easily grant as it seeks to maintain control over Spore's banking system. DBS highlights the transaction is still under process. DBS currently trades at 1.1x P/B, below its historical mean of 1.4x. Street is generally maintaining its buy rating (63%) for the stock with consensus TP of $16.36.