LANDBANK, DBP listings seen increasing gov’t banks’ lending capacity, transparency

POSSIBLE public listings for Land Bank of the Philippines (LANDBANK) and the Development Bank of the Philippines (DBP) will give them more flexibility in raising capital and potentially improve their lending capacity, analysts said.

“An initial public offering (IPO) of LANDBANK and DBP is worth exploring as an avenue for raising equity capital from the private sector rather than the government,” China Bank Capital Corp. Managing Director Juan Paolo E. Colet said in a Viber message.

Finance Secretary Ralph G. Recto has said that the department is working on draft bills that seek to amend the state banks’ charters. The possible changes include provisions that will allow for their public listing in an effort to “broaden the capital markets.”

COL Financial Group, Inc. Chief Equity Strategist April Lynn Lee-Tan said in a Viber message that going public will help the banks raise capital and improve their transparency.

This could also improve their lending to satisfy public shareholders seeking improvements in the banks’ returns, she added.

“Any public offering from any reputable institution would be a welcome addition to both the exchange and clients,” Regina Capital Development Corp. Head of Sales Luis A. Limlingan said in a Viber message.

This year, the Philippine Stock Exchange is expecting at least six IPOs. There are two ways to publicly list on the bourse: through an IPO or listing by way of introduction.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the biggest banks in the country are already listed or partly owned by the investing public.

“That would also give greater flexibility and versatility to raise funds from investors,” he said in a Viber message.

Mr. Colet said LANDBANK and DBP must be prepared to make the transition to going public.

“The key challenge is how to get these banks ready to become publicly listed companies that can provide attractive returns to their investors,” he said.

“This not only requires a change in their charters, but, equally important, a change in their mindset and processes to align with best practices in the banking industry and the expectations of sophisticated institutional investors.”

Ateneo de Manila economics professor Leonardo A. Lanzona warned that any changes to the banks’ charters must not risk their financial stability.

“While there is no clear and urgent need to change the charters of LANDBANK and DBP, it is crucial for these banks to maintain their capital position and not be waylaid by politically motivated policies like the Maharlika fund,” he said in an e-mail.

“As such, their charters should reflect the need to maintain and not compromise their financial strength. This means that an assessment of the banks’ strength should first be completed before any contribution to the National Government is made,” he added.