‘Spin’ obscures DBP’s actual financial strength

It has become difficult to see the truth in the growing controversy that surrounds the transactions of the state-owned Development Bank of the Philippines, including the recently uncovered P1.67-billion write-off of bad loans of the Lopez family-owned firms, according to the bank’s former president, Reynaldo David.

The popular theory in circulation since the DBP’s loans to businessman Roberto Ongpin were made public earlier this year is that the state-owned financial institution became a virtual piggy bank for persons close to the Arroyo administration, with all sorts of shortcuts being taken in the process of accommodating their loan requests.

The latest rumor making the rounds, meanwhile, is that the influential Lopez family is the hidden hand behind the investigation into DBP’s dealings with businessman Roberto Ongpin.

The end goal, according to persons familiar with the “theory,” is for the family to recover control of Manila Electric Co., which has been carved up between businessmen Manuel V. Pangilinan of the PLDT group and Ramon S. Ang of the San Miguel conglomerate (with Ongpin having helped the latter during the battle for control three years ago that saw the Lopez family lose control of their crown jewel).

Whatever the truth may be, the conflicting theories obscure the fact that the transactions in question—both the P1.67-billion Lopez group loan write-offs and the so-called “behest” loans extended to the Ongpin camp— ended up improving the financial standing of DBP, David told the Inquirer in an interview.

Documents about the deal obtained from banking sources showed that the bank had, in fact, written off P9.56 billion worth of bad loans, with the controversial Lopez group loans accounting for only 17 percent of that total.

A list of soured loans of the DBP at that time showed that, while the combined loans to the Lopez group accounted for a substantial portion of the portfolio, there were other corporate loans that were also put up for disposal.

Other firms with bad loans then included Bacnotan Steel Industries, which owed the bank P478 million in 2006; J.S. Gaisano Inc., P361 million; Steel Corporation of the Philippines, P342 million; and Negros Navigation Corp., P300 million. These were among 795 other delinquent borrowers at that time.

David said the decisions made by the bank’s board were in no way influenced by political considerations, but were made solely on their benefits to the government financial institution.

“There was no call from the President or the Palace telling us to bail out the Lopezes,” he told the Inquirer in an interview, when asked about the write-offs executed in 2006, when the influential family was still on friendly terms with the Arroyo administration.

DBP wrote off P710 million in loans of Maynilad Water Services Inc. (which soured in 2003); P591 million in loans of Bayan Telecommunications (soured in 2001); P207 million of Central CATV Inc. (soured in 2001); and P157 million of Benpres Holdings Inc.—all Lopez-owned or -controlled firms at that time.

“There were no political considerations here,” he said. “It was purely to improve the bank’s logistics.”

David—a former Citibank executive known among peers for his aggressive, fast-paced and sometimes abrasive management style—described the write-off of Lopez group loans as being “purely business.”

“It’s the same with the Ongpin group transactions,” he said. “No one from the Palace called us ordering us to lend to Ongpin.”

The former DBP chief noted that, under his watch, the bank dealt with clients on either end of the political spectrum, whether the Lopezes or the Ongpins, as long as it would benefit the financial institution.

The write-offs were made possible by the Special Purpose Asset Vehicle Law of 2002, which was enacted to help the Philippine banking system dispose of accumulated bad loans then estimated at P520 billion—equivalent to an alarming 12 percent of the size of the local economy.