President Ferdinand Marcos Jr. supports the merger of state-run Development Bank of the Philippines and Land Bank of the Philippines, with the latter as the surviving entity, Finance Secretary Benjamin Diokno told reporters Tuesday.
Diokno said in a message the merger would create the largest financial institution in the country that would better serve the country’s development needs.
DBP first vice president Zandro Carlos Sison said in a statement there is no formal decision on the merger of the two banks. “DBP believes that any merger would require an act of Congress as both institutions were created by enabling laws,” the bank said.
The DBP said it shares the sentiments of President Marcos on the need to conduct a thorough and meticulous legal study on the proposed merger which he firmly declared during a meeting the parties on March 28.
“DBP is committed to fulfilling its mandate of being a catalyst for national development by serving the financing needs of strategic and critical economic sectors, particularly infrastructure and logistics, micro, small and medium enterprises, social services and the environment,” the bank said.
“We assure the general public that the entire board of directors, management team and the rest of the public servants of DBP remain steadfast in serving the banking needs of our clients. And we shall continue to do so with the same passion, dedication, and commitment as we have done for the past 76 years,” it said.
Diokno said the combined branches of the two banks would result in a wider network of banking operations, and the merged bank would become the largest bank in the Philippines in terms of assets and deposit size.
Diokno said the merger would eliminate redundancy and inefficiency in operations of the two banks. “Projected operating costs savings due to the merger could reach at least P5.3 billion per year, or more than P20 billion over the next four years; this is a conservative estimate,” he said.
He said the merger would complement the strengths and address the weaknesses of the two banks, while the improved financial position would provide a bigger headroom for loans that could be utilized for development projects.
“The merger will help avoid the need for DBP to recapitalize—from P30 billion to P100 billion—and seek capital infusion from the national government,” he said.
Diokno said both banks were “well performing, but we have to constantly seek better ways of doing things.”
He said the merged bank would be in the best position to serve as the sole authorized government depository bank for the entire government and its instrumentalities.
“Having a single bank remains the best practice in the region and simplified procedures with counterparties,” Diokno said.
LandBank posted a 38.2-percent increase in net income in 2022 to P30.1 billion from P21.7 billion in 2021 and surpassed by almost P5 billion its full-year target of P25.7 billion. It breached the P30-billion mark in total net income for the first time, driven by the substantial interest income from loans and investments, alongside earnings from fees, commissions and foreign exchange, among other income sources.
Assets posted a double-digit expansion of 21.5 percent to P3.1 trillion from P2.6 trillion, driven by deposits which expanding by 21.8 percent to P2.8 trillion from P2.3 trillion.
The government sector accounted for the bulk of total deposits at 67.6 percent or P1.9 trillion. This includes deposits from national government agencies and government-owned and -controlled corporations, which increased 48.1 percent and 22.5 percent, respectively, over the previous year.
The bank’s capital grew a modest 1.4 percent to P210.6 billion from P207.7 billion a year ago. This was realized despite the P8.5 billion in special cash dividends remitted to the national government in June 2022, due to the record net income.
Its financial ratios remained at healthy levels, with return on equity at 14.37 percent, return on assets at 1.05 percent and net interest margin at 2.97 percent.
DBP registered a net income of P5.61 billion in 2022, or 50 percent higher than P3.74 billion in 2021, on robust lending amid the full reopening of the economy.
DBP exceeded its net income target for the year of P3.85 billion by 46 percent. DBP extends credit support to infrastructure and logistics; micro, small and medium enterprises; the environment; and social services and community development. It has a network of 132 branches and 15 branch lite units.
Total loans rose 12 percent to P527 billion from P469.40 billion, with the bulk of releases amounting to P297.14 billion channeled to projects in the infrastructure and logistics sector which represent 56 percent of its total loan portfolio.
DBP’s outstanding loan portfolio in 2022 amounted to P105.91 billion for projects under the social infrastructure and community development sector, and P70.04 billion for loans to other developmental projects which include financial and insurance activities, manufacturing, wholesale and retail trade, accommodation and food services.