How will Philippine National Bank and Allied Banking perform after the merger?

Philippine National Bank and Allied Banking, both controlled by billionaire Lucio Tan, will merge after a court order ended a 21-year ownership dispute over his stake in one of the two banks. The Philippine Supreme Court gave Tan, the nation's third-richest man, the ownership of Allied Bank and other assets. The Presidential Commission on Good Government, the state agency tasked to recover so-called ill-gotten assets, earlier sought ownership of Tan's Allied Bank stake and other holdings.

The merger will allow Tan, 73, to overtake Land Bank of the Philippines as the country's fourth-largest bank by assets, extending an empire that also includes the nation's biggest carrier. The merger, expected in the first half, will help Philippine National compete more effective, said President Omar Mier. Tan's plan ``makes perfect sense because it will give the merged entity more scope to lever up in terms of efficiency and access to low-cost funding,'' said Ed Bancod, head of research at ATR-Kim Eng Securities in Manila.

The combined bank will have 370.7 billion pesos ($8.9 billion) of assets, compared with state-owned Land Bank's 367.8 billion pesos. Philippine National surged 7.6 percent to 49.50 pesos as of the noon end of trading in Manila, its biggest gain in more than five months. ``The merger will create a bigger, stronger and more profitable bank,'' Mier said. The union will create the nation's fifth-biggest bank in terms of capital, up from sixth currently, he said.

Philippine National's profit was 4.3 percent of sales last year, the lowest margin among 16 publicly traded banks in the country. The stock has risen 13 percent this year, trailing a 26 percent increase in the benchmark index. The court decision, also gives Tan control over Fortune Tobacco, the biggest tobacco maker in the Philippines. The outcome cements Tan's reach in the Philippine economy, where he also owns Philippine Airlines as well as Asia Brewery.

The Supreme Court voided the so-called ``sequestration'' order on some of Tan's assets, freeing them from the hold of the government task force. The state agency said it will appeal the court ruling. ``Whether or not the assets are ill-gotten is still pending'' the decision of the anti-graft court, said Presidential Commission Director Jay Miguel in Manila. The anti-graft court ruled against the government on a 20-year claim over shares in San Miguel. Tan will still need the consent of the anti-graft court to dispose of his assets, the commission director said. The Supreme Court decision proves there's no basis for the government to say the shares were ill-gotten, Tan's lawyer Estelito Mendoza said.

Is Lucio Tan extending his reach too far in the Philippines?