The country’s largest bank, Banco de Oro Unibank, will earn an additional P600 million to P800 million a year if it buys and rescues the operations of mid-sized Export and Industry Bank (Exportbank).

The Philippine Deposit Insurance Corp. (PDIC) provided Exportbank P9 billion soft loan in 2005 since it was decided at the time that allowing the bank to fail will cause a systemic risk, but not a contagion.

BDO, as the “white knight,” would have to assume the Exportbank loan. However, PDIC and the Bangko Sentral ng Pilipinas had to assist in making the burden less intrusive on the books of BDO as the rescuing bank.

Sources familiar with the situation said PDIC is currently reviewing the BDO proposal of extending the maturity of Exportbank’s loan by another 20 years. The P9-billion loan will expire on 2013 and the Sy-controlled bank was asking to pay back the loan it will assume by 2029 instead.

BDO has a pending proposal for its own loan with the PDIC amounting to P11 billion as assistance funds to buy Exportbank. The plan was to give the loan a maturity of 25 years or until 2035.

Sources explained that there will be no cash out for BDO. What will happen is that PDIC will buy government securities and they will give BDO the interests on the debt papers. At the end of the loan period, BDO will sell the government securities to unload and re-pay PDIC.

Banking sources said for BDO to take on Exportbank, it will need help from the BSP and PDIC since valuation-wise, the cost of acquiring selected assets of mid-sized Exportbank is about P500 million only.

The BSP is currently reviewing the BDO loan proposal to finance the acquisition of Exportbank. Other incentives include the grant of 30 additional branches in restricted areas on top of the 51 branches Exportbank has.

Sources said BDO initially offered P450 million for the select assets of the smaller bank but the offer price has gone down to just P300 million.

BSP has three times renewed Exportbank’s authority to raise P3.3 billion in capital. The last deadline was October 30. The bank has also been under the central bank’s “ICU” or the prompt corrective action since 2007.

Exportbank had P19 billion in deposits of which only P4.4 billion are insured, said sources.