MANILA – Finance Secretary Benjamin Diokno said President Ferdinand Marcos Jr. had “approved” the planned merger of Development Bank of the Philippines with Landbank of the Philippines on Tuesday morning in a sectoral meeting on the merger in Malacañang.
Diokno told reporters the approval was based on the following arguments in favor of the merger of the two state-run banks:
- The merger will create a bigger and stronger bank to better serve the country’s development needs.
- The combined branches of the two banks results in a wider network of its banking operations
- The merged bank will become the largest bank in the Philippines in terms of assets and deposit size
- The merger will eliminate redundancy and inefficiency in operations
- Projected operating costs savings due to the merger could reach at least P5.3 billion per year, or more than P 20 billion over the next four years; this is a conservative estimate.
- The merger complements the strengths and addresses the weaknesses of the two banks
- The improved financial position will provide a bigger headroom for loans that can be utilized for development projects
- The merger will help avoid the need for DBP to recapitalize — from P30 billion to P100 billion — and seek capital infusion from the national Government
- The merged bank will be in the best position to serve as the sole authorized government depository bank for the entire Philippine government and its instrumentalities
- Having a single bank remains the best practice in the region and simplified procedures with counterparties.
“The President expressed the desire to merge the two to make it the biggest bank in the country because of recent financial developments abroad. And that’s really the best practice. The biggest bank is usually owned by the state, globally,” Diokno said in a Palace briefing.
However, he said the President had expressed concern about the merger process, saying that none of the services of the two banks should be lost.
“We assured him that with the merger… because both Land Bank and DBP are universal banks, they do almost the same, except that one is focused on agriculture and the other on industrial projects, but they do practically the same,” the Finance chief said.
“With the merger, there will be savings, and the merged bank will be stronger, and maybe the interest rate that they will be charging will be lower,” he added.
Diokno said the government planned to put up Land Bank branches in all local government units in the country, while only 22 out of the 147 branches of DBP would be retained.
“We’ll be able to save a lot of money for the national government. This does not include revenues that can be derived from the sale of redundant assets of DBP, various properties such as its head office in Makati, a property in BGC, various branch properties, equipment and licenses,” Diokno said.
He also said the government would offer “attractive” severance packages to those who will lose their jobs as a result of the proposed merger.
The DBP board and management had opposed the merger, saying that DBP’s infrastructure financing mandate was still very much relevant and it will play a key role in the administration’s infrastructure development program.
The bank’s charter describes DBP as a development bank that may perform all other functions of a thrift bank, with the main objective of catering to agricultural and industrial enterprises, especially the small- and medium-scale firms.
DBP argued that the combined entity that would be the largest bank in the country might be more difficult to save if not governed and managed properly, and failed.