LANDBANK, DBP may be allowed to list shares
THE Department of Finance (DoF) said it is drafting bills to amend the charters of the two major state-owned banks, including provisions that will allow them to list shares.
“We are exploring the amendments to the charters of the Land Bank of the Philippines (LANDBANK) and the Development Bank of the Philippines (DBP), including their possible public listing, to broaden the capital markets,” Finance Secretary Ralph G. Recto was quoted saying in a speech.
Asked to elaborate, Mr. Recto replied in a text message: “We have a draft bill for both. We (will) release soon.”
Mr. Recto’s remarks provide an indication of the strategic direction being mapped out for the state-owned banks, after the government withdrew plans to merge the two institutions.
No further details were provided on the proposed charter amendments.
LANDBANK is the official depository bank of the National Government. It is also tasked to promote countryside development and spur credit activity and financial inclusivity for rural communities.
The DBP performs all the other functions of a thrift bank beyond its primary development mission. It services the medium- and longterm needs of agricultural and industrial enterprises, with a focus on small- and medium-scale industries.
LANDBANK posted asset growth of 4.2% to P3.3 trillion last year. It is the second-largest Philippine bank behind BDO Unibank, Inc.
The central bank reported that the DBP’s assets amounted to P978.5 billion at the end of the third quarter.
Mr. Recto had announced the cancellation of the planned merger, citing the two banks’ differing missions.
“It will be good to continue having two government depository banks,” he added.
The BSP also confirmed not to receive any application for the proposed merger.
In March, President Ferdinand R. Marcos, Jr. ordered the merger of the two lenders, with LANDBANK the surviving entity, becoming the sole authorized government depository bank.
Former Finance Secretary Benjamin E. Diokno had pitched the merger as a consolidation of resources to simplify dealings with counterparty banks and multilateral lenders.
Fitch Ratings, in a commentary, said that contributions of both state banks to the Maharlika Investment Corp. (MIC) “are unlikely to affect the banks’ issuer default ratings, which are driven by sovereign support.”
“However, the banks’ viability ratings, which indicate their standalone credit profiles, might be lowered absent concrete plans to replenish their diminished loss absorption buffers.”
Under the law, the LANDBANK and the DBP are required to contribute P50 billion and P25 billion to Maharlika, respectively.
“The investments would have significantly eroded the banks’ regulatory capital ratios if not for regulatory relief,” Fitch Ratings said.
“Without this relief, we estimate that the capital contributions would have shaved about 4.5 percentage points (ppts) off DBP’s common equity Tier 1 ratio of 13.2% and 3.6 ppts off
LANDBANK’S common equity Tier 1 ratio of 14.5% as at September 2023.”
The credit rater said that this underpins its negative outlook on the banks’ capitalization scores, which it may revise down if the banks cannot replenish their capital buffers in the near to medium term.
“Regulatory relief that exempts the banks from deducting capital is insufficient to support the capitalization scores, as it does not improve the banks’ underlying capitalization,” it said.
“However, the planned exemption of dividend payments to the government could help rebuild capital to ameliorate the deficit.”
Fitch Ratings said that the banks’ investment in Maharlika “reinforces the government’s propensity to support the banks, as it further entrenches their policy roles, making them more strategically important to the state.”