MANILA, Philippines—The merger of state-run lenders Land Bank of the Philippines and United Coconut Planters Bank (UCPB) will be completed early in 2022, after full approval by regulators, Landbank president and chief executive Cecilia Borromeo said on Thursday (Dec. 16).
While UCPB was not yet legally merged with Landbank, UCPB is now Landbank subsidiary, Borromeo said in a text message.
“We are currently working to get all necessary regulatory approvals. We expect the merger to be implemented during the first quarter of 2022,” Borromeo said.
Borromeo would not say which regulators have yet to approve the merger.
President Rodrigo Duterte in June issued Executive Order (EO) No. 142, which set into motion the two government financial institutions’ (GFIs) merger, and which will result in Landbank as the surviving entity.
In a message to clients and creditors of both Landbank and UCPB on Thursday, Borromeo assured a “smooth” merger process.
“Rest assured that your deposits will remain intact and secured, and that your bank transactions will be unhampered and uninterrupted,” Borromeo said.
“We shall also ensure that the rights of all depositors and clients are upheld and protected,” Borromeo added.
Borromeo said that the merger will result in a “stronger, more resilient and unified banking institution” which would also promote financial inclusion, especially among still unbanked and underserved Filipinos.
Put together, the merged Landbank-UCPB will make it the Philippines’ second biggest bank with about P2.7 trillion in combined assets, next only to BDO Unibank.
Borromeo said Landbank was “more than capable of absorbing the financial impact of its merger with UCPB.”
“The impact on its profitability, liquidity and solvency ratios will be manageable, and its performance ratios will remain comfortably above the standards set by the Bangko Sentral ng Pilipinas (BSP),” Borromeo said.
According to industry sources, the government had moved to merge the two banks as UCPB’s capital adequacy ratio (CAR) had been set to fall below the BSP’s mandatory level.
Had it not been for the state-run Philippine Deposit Insurance Corp.’s (PDIC) capital notes, which saved UCPB in the past, the bank would have been non-compliant with the CAR requirement, sources said.
In July of last year, PDIC president and chief executive Roberto Tan said “the government has been supporting UCPB since the PDIC granted financial assistance in 2003 as part of the bank’s recapitalization program,” including the restructuring of a portion of the PDIC’s assistance into P12-billion convertible capital notes in 2019.
“The government, through the Bureau of the Treasury, also maintains substantial deposits” in UCPB, Tan added.
It was also in July of last year when the government abandoned its previous plan to privatize UCPB and instead raised its stake in the bank to 97 percent from 75 percent previously.
Tan said the government’s majority stake in UCPB was a reaffirmation of its commitment to support the bank.
Borromeo said the forthcoming merger will also benefit the two banks’ clients like farmers and the agriculture sector, as they would be able to access a bigger network of ATMs and branches offering more products as well as services.