New administration to decide on DBP-Landbank planned merger

THE MERGER of state-run lenders Development of the Philippines (DBP) and Land Bank of the Philippines moved forward with a business plan filed before the Bangko Sentral ng Pilipinas (BSP) last week even as officials said there was no more time to finish the process before President Aquino steps down next month.

“I was pushing for [DBP and Landbank’s merger], but we don’t have time to complete it,” Finance Secretary Cesar V. Purisima said last week.

The Inquirer learned from highly placed Department of Finance sources that DBP and Landbank last Thursday submitted to the BSP a business plan for the merger. A source clarified it was not yet a formal application that must be filed with the regulators, the BSP and the Philippine Deposit Insurance Corp., both of which would eventually give the blueprint the go-signal.

But a Finance official said “the merger has started and timelines were established,” citing information from DBP and Landbank officials. The source said it would now be up to the next administration to either continue or call off the merger.

Another source said the two banks were still in the process of complying with the requirements for the merger.

Last February, President Aquino issued Executive Order (EO) No. 198, which would facilitate the merger of DBP and Landbank within a one-year timeline. The latter would become the surviving entity.

The merger would result in a stronger bank that has total assets of P1.71 trillion, based on end-2015 BSP data, challenging local tycoons’ dominance in the banking sector.  The merger would make the surviving entity the country’s second largest bank in terms of assets.

The bigger lender to be established from the Landbank-DBP merger was expected to increase loans to infrastructure projects on top of other initiatives.

“The merger would result in a combined single borrower’s limit (SBL) of P26 billion compared with DBP’s SBL at P9 billion and Landbank’s at P17 billion. A higher SBL would enable the surviving bank to fund big-ticket infrastructure projects,” the Governance Commission for Government Owned or Controlled Corporations (GCG) said in a briefing paper.

Once merged with DBP, the surviving entity Landbank would not only be the second biggest universal bank in terms of assets, but also the second largest in terms of deposits with nearly P1.3 trillion.

“In terms of loans and capitalization, it would be fourth [biggest] at P583 billion and P114 billion, respectively. Thus, it should provide a more stable and stronger base for developmental financing,” the GCG said.

According to the GCG, “more underserved and unbanked areas would be reached by the surviving bank through rationalization of the existing branch networks of DBP and Landbank.”

“Planned branch openings and relocation of branches would expand the reach of the surviving bank to 298 cities and municipalities. With its wider presence, the surviving bank can offer more financial services to overseas Filipino workers, small and medium enterprises, and the agriculture-agrarian reform sector who are the natural customers of its branch network,” the GCG said.

Also, the surviving bank would have an automated teller machine (ATM) network of 1,670 nationwide, which the GCG said “could also provide access for beneficiaries of the 4Ps [Pantawid Pamilyang Pilipino Program].”