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Over a fifth of LBP’s gross loans went to farmers, fishers, agribusinesses

By: - Reporter / @bendeveraINQ
/ 04:42 PM July 24, 2019

MANILA, Philippines — No less than the head of the economic team has defended the Land Bank of the Philippines (LBP) after President Rodrigo Duterte threatened to abolish the state-run lender for supposedly forgetting its mandate to serve the agriculture sector.

This while data showed that over a fifth of LBP’s lending portfolio to date supported farmers, fishermen, and agribusinesses.

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In an interview Tuesday night, Finance Secretary Carlos G. Dominguez III, who also chairs LBP, said that besides adhering to the President’s order that the lender further increase its exposure to agriculture, they will also report to Duterte either within the month or during the upcoming Cabinet meeting scheduled on August 8 that the country’s fourth-biggest bank in terms of consolidated assets was leading the pack in terms of assistance to the agriculture sector.

LBP president and chief executive Cecilia C. Borromeo said that as of June this year, the bank’s exposure in terms of loans to small farmers and agrarian reform beneficiaries amounted to P42.17 billion or 5.27 percent of the P799.64-billion total gross loan portfolio.

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LBP data showed that end-June loans to small fishermen reached P140 million or 0.02 percent of total.

LBP was mandated to cater to farmers and fishers’ borrowings.

At end-June, LBP also had P119.52 billion (14.95 percent of total) in loans to agribusinesses; P2.59 billion  (0.32 percent) to aqua-businesses; and P55.21 billion (6.9 percent) to agri- and aqua-related projects of local government units (LGUs) and government-owned and/or -controlled corporations (GOCC).

Across the mandated sectors, agriculture and fisheries, the P177.32 billion in gross loans provided by LBP accounted for 22.17 percent of the total.

The bulk amounting P744.49 billion or 65.64 percent of LBP’s gross loan portfolio as of June supported the national government’s priority programs, including public-private partnership (PPP) projects; micro, small and medium enterprises (MSMEs); communications; transportation; socialized, low- and medium-cost housing; education; health care; environment-related projects; tourism; utilities; and livelihood loans.

On a per sector basis, utilities cornered the biggest share of LBP’s gross loan portfolio at end-June with P135.1 billion in loans or 16.89 percent of the total.

Dominguez noted that LBP not only serves as the government’s main depository but also disburses both the conditional and unconditional cash transfers to poor families, the Pantawid Pasada to transport operators affected by the increase in oil excise tax, and senior citizens’ pension.

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“Now if you have this large portfolio, you have to invest it in your main clientele and it’s really to support government programs and among them are, of course, lending to the agriculture sector. And then they lend to priority programs of the government, including tourism, etc.,” Dominguez said Tuesday night.

“Compared with other banks of any size, [Landbank] is the bank with the largest proportion of loans to the agriculture sector compared to any other bank of similar or smaller size,” the Finance chief added.

Also, Borromeo said LBP was the only lender that complies with the Agri-Agra Law requirement.

Republic Act (RA) No. 10000 or the Agri-Agra Reform Credit Act mandated banks to allocate 15 percent of their total loanable funds to agriculture, on top of 10 percent for agrarian reform.

As a whole, the domestic banking industry’s compliance fell below these thresholds, hence, all other banks pay through alternative compliance.

In a message to reporters Monday night, Dominguez said LBP had sufficient resources for both its mandate and the plan to buy shares in the bond trading platform Philippine Dealing System Holdings Corp. (PDS).

LBP was eyeing to acquire a 49-percent stake in PDS before this year ends, and become the biggest shareholder.

“We are working on the regulatory clearances, and we hope to finish it [the acquisition] within the year,” Borromeo told reporters this month.

Borromeo said they were already seeking clearances from the Bangko Sentral ng Pilipinas (BSP), Governance Commission for Government-Owned or Controlled Corporations (GCG), and Securities and Exchange Commission (SEC) for the transaction.

The LBP chief said the offer price to buy PDS shares from other shareholders at P215 per share stays, based on the lender’s updated valuation.

So far, LBP secured the commitment from about 21 percent of shareholders, she said.

Borromeo said they wanted to secure a maximum of 49-percent stake “because we don’t want it [PDS] to become a GOCC [government-owned and/or -controlled corporation].”

She explained that if PDS becomes a GOCC, “the regulations will be very different—COA [the Commission of Audit] will audit it.”

Borromeo said LBP wanted PDS to remain private-run “but we are a shareholder of that private entity.”

Asked if LBP was no longer eyeing a majority stake or at least 51-percent share to control PDS, Borromeo replied: “We are in the process of conducting legal due diligence to assess the full implication of a potential 49-percent stake in PDS.”

She said the transaction was expected to be finished by the fourth quarter.

Former LBP chief Alex V. Buenaventura had extended by three times the deadline to buy PDS shares until Borromeo took over as head of the state-run lender.

In March, Borromeo said LBP was “taking into serious consideration the proposed amendments and extension requests we’ve received from various stakeholders.”

The downgraded offer, from P360 a share previously, had taken into account the P600 million in dividends that PDS issued to shareholders in June last year, which reduced PDS’s asset value.

The share price nonetheless remained a multiplier of 1.5 times the adjusted net asset value or the same as the previous offer.

During the initial offer in March last year, only 43 percent of shareholders submitted acceptance letters.

At present, LBP owns 1.56 percent of PDS through the Bankers Association of the Philippines (BAP). /kga

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