The merger plan for state-run Land Bank of the Philippines and Development Bank of the Philippines remains on the table, based on a statement made by Finance Secretary Carlos Dominguez III during the Financial Executives Institute of the Philippines’ general membership meeting on Tuesday.
“As regards to DBP, I think we really have to review the viability of DBP on its own. We just recently concluded the merger of UCPB and LandBank. I prioritized that over the merger with DBP because, if you analyzed it, we have a potential risk of failure for UCPB that will cost PDIC [Philippine Deposit Insurance Corp.] P150 billion,” Dominguez said.
“So we decided we will put UCPB first in a safe place, and then moving forward,” Dominguez said.
The Duterte administration in 2016 stopped the planned merger of LandBank and DBP, which was approved by President Benigno Aquino III through Executive Order 198.
The merger would have resulted in a bank with combined assets of P1.71 trillion based on data from the Bangko Sentral ng Pilipinas as of end-2015.
Dominguez said that “we are also proposing a change in the charter of LandBank, which I don’t think can get passed in this administration.”
LandBank has a stupid charter which says only cooperatives can invest in it,” he said.
“So what we are doing is increasing the authorized capital of LandBank from P200 billion to P800 billion, increasing the paid-up capital to P200 billion, and hopefully, start listing LandBank to the stock market to the extent of about 20 percent, with no group holding more than 5 percent of LandBank. So that is the plan. That is the proposed legislation that we have done. I hope it gets done by the next administration,” Dominguez said during the FINEX event.
LandBank took over United Coconut Planters Bank through a P2.7-trillion merger in June 2021. LandBank president and chief executive Cecilia Borromeo said the merger would strengthen government efforts to build a stronger, unified banking institution capable of serving coconut farmers and other workers in the agricultural sector.
President Rodrigo Duterte issued Executive Order No. 142 to ordering LandBank and UCPB to enter into a merger applicable to government-owned and -controlled corporations and recognized by regulatory agencies.
LandBank, the biggest public sector bank in the country with total assets of P2.362 trillion as of end-2020, was the surviving entity under the merger. UCPB reported total assets of P358 billion as of end-2019.
Borromeo said the merger would promote unprecedented rural development, in keeping with the government’s goal of expanding financial inclusion among Filipinos, especially those in the countryside who belong to the underserved and unbanked sectors.