DBS Group, the Singapore-based financial services firm, is divesting part of its stake in Bank of the Philippine Islands as part of a capital strengthening effort.

The bank will sell 10.4 per cent of its 20.3 per cent interest in BPI to Ayala Corporation for a total consideration of S$757.3 million  in cash. DBS has been an investor in the Philippine bank since 1999. After the sale, the firm will continue to own a 9.9 per cent stake and keep a seat on the BPI board.

The deal also effectively increases Ayala's ownership in Bank of the Philippine Islands from 33.6 per cent to 44 per cent.

The transaction is in preparation for the introduction of Basel III in 1 January 2013, DBS said. The sale price represents a gain of around S$450 million against the carrying value of the investment. 

"We are pleased that the transaction will allow us to continue being a meaningful shareholder in a capital-efficient manner," said Piyush Gupta, chief executive of DBS.

The sale is not expected to have any material financial effect on DBS' net asset value for the financial year to 31 December 2012.