TPG Growth bets on Filipino rural bank

The firm has now made financial services investments in numerous growth markets, including Indonesia, India and Sri Lanka.

US global investment firm TPG is buying a 40 percent stake in the rural bank subsidiary of Banco de Oro (BDO) Unibank, the Philippines’ largest domestic bank, the firm said in a statement.

Financial terms were not disclosed.

TPG will acquire One Network Bank (ONB) through TPG Growth III, a 2015-vintage vehicle which raised $3 billion. Limited partners in the fund are the New York State Common Retirement Fund and the Washington State Investment Board, which both invested $300 million; the Teacher Retirement System of Texas, which committed $250 million; and the California State Teachers’ Retirement System and the Oregon Public Employees’ Retirement System, which both committed $200 million, according to PEI Research & Analytics.

The company will use the investment to accelerate its expansion in the provinces and to develop new products in the underserved market segments.

BDO will retain 60 percent ownership of ONB, which has more than 100 branches in the Mindanao region.

ONB was formed in 2004 through the consolidation of three rural banks, Rural Bank of Panabo, Network Rural Bank (Davao) and Provident Rural Bank of Cotabato. BDO had purchased ONB for PHP 6.7 billion ($144 million; €127 million) last July through a share-swap deal, according to the Philippines’ Securities and Exchange Commission.

TPG has a track record with financial institution in developing markets. In 2008, it bought a 72 percent stake Indonesian lender Bank Tabungan Pensiunan Nasional (BTPN) for around $195 million. During the firm’s ownership, BTPN opened more than 550 new branches and created a microloan business that grew the bank's customer base to more than two million individuals and 250,000 small business owners.

Earlier this year, the firm led a $210 million funding round in Bangalore-based microfinance lender Janalakshmi Financial, alongside Morgan Stanley Private Equity Asia and electrical equipment company Havells India.

Other financial institutions TPG has invested in include Indonesian microfinance institution BFI, the Shenzhen Development Bank in China, the Union Bank of Colombo in Sri Lanka and India’s Shriram City Union Finance.

The investment in ONB marks TPG's second investment in the Philippines, having previously invested in housing developer 8990 Holdings in 2014.

“TPG has worked with many highly impactful financial services businesses across Asia. Our insight in the sector has come from years of identifying and developing the full potential of strong businesses,” head of TPG South-East Asia Ganen Sarvananthan said. 

The transaction is subject to closing conditions and regulatory approval.

TPG Growth is a middle market investment platform of TPG that manages more than $7 billion across technology, media, industrials and financial services sectors.

Singapore’s Government Investment Corporation, Baring Private Equity Asia, ADM Capital, Capital International and CVC Capital Partners are among private equity firms that have invested in the Philippines in the last five years.

Earlier this month, private equity players told Private Equity International they are “cautiously optimistic” about the Philippines’ newly elected president Rodrigo Duterte, who has made a splash in international headlines with his comments on restoring law and order in the country. He had initially said he would wage a “bloody war” against crime and eradicate corruption in the first six months of his term.