‘Reformed’ DBP remits P4B

MANILA, Philippines—A new, “reformed” Development Bank of the Philippines (DBP) is the latest poster boy for President Benigno Aquino III’s path of righteousness (daang matuwid).

Keynoting the DBP’s 65th anniversary celebrations on Fridy, the President said adhering to the ideals of transparency and accountability were not easy but the DBP has shown that it makes good business sense.

Mr. Aquino praised the state-owned financial institution for implementing reforms under his administration and generating and remitting P4 billion to the national treasury—the second highest in the bank’s existence.

“The noise we hear from some quarters is that such tightening processes and such strictness in the way our institutions work are bad for business. How can it be bad for business when DBP’s performance proves otherwise?” he said.

“In 2011, DBP registered a net income of P4.02 billion, eight percent higher than its target for the year of P3.73 billion. There was robust growth in deposits, loans and investments. This, despite economic uncertainty all around the globe,” he said.

Strong and sound

The DBP registered a net income of P4.02 billion in 2011, an increase of nine percent from the P3.68 billion it registered the previous year, DBP president and CEO Francisco del Rosario Jr. reported recently.

“DBP continues to exhibit a strong balance sheet and maintained a sound financial performance. More importantly, DBP remained true to its developmental core by supporting the priority thrusts of the Aquino administration,” Del Rosario said.

The percentage of developmental loans to commercial loans is 93 percent and seven percent, respectively, according to the bank’s website.

Del Rosario said the DBP’s net income for 2011 was the second highest that the bank has recorded in its 65-year history. It posted an average net income of P3.7 billion in the past six years.

Bank was victim

Mr. Aquino said the DBP was one of the dozens of government institutions “that had been victimized by an administration fueled by self-enrichment.”

He said a Senate investigation had found that a company with only two dollars of paid-up capital received a $90-million loan from the DBP under the previous Arroyo administration.

He was referring to the P660 million in loans that the old DBP board extended to businessman Roberto Ongpin, which is the subject of an ongoing Senate investigation and a court case brought by the new DBP board against the old DBP board and Ongpin.

Ongpin used the money from the loans to acquire DBP’s 50 million shares of Philex Mining Corp., the country’s biggest gold and copper mining firm. He later sold the Philex shares to businessman Manuel Pangilinan at a huge profit.

‘Lost decade’

According to Mr. Aquino, after 19 months, the DBP is back to its true purpose of financial support in line with the agenda of development, poverty reduction and inclusive growth.

“Today, in the beginning of its 65th year, the DBP has begun to close the door on that lost decade. It has begun to reclaim its honor by holding accountable those who abused the institution,” he said.

“The turnaround that the DBP is now experiencing was about the initiative, hard work and courage of so many people: the new and committed board of the DBP; a Senate and House of Representatives that stand with us in our agenda of reform; and the hundreds of employees of the DBP who now find a space where decency and integrity are lauded, and not stifled,” he added.

Rationalized perks, bonuses

Mr. Aquino said his administration last year rationalized the perks and bonuses that those working in government-owned corporations and financial institutions are entitled to receive with the GOCC Governance Act.

“In line with the spirit of restoring transparency in our institutions, I am told that the DBP has recently adopted a new policy that seeks to protect whistle-blowers and that it will be offering values-formation programs for all bank officers and personnel,” he said.

“I hear the bank has also reactivated the office of its resident Ombudsman. These measures will go a long way in safeguarding the integrity of this institution, and I thank those at DBP for their active pursuit of transparency and accountability,” he said.

Raising money for lending

Also on Friday, Del Rosario announced that the DBP will soon be issuing P7 billion worth of debt securities in the domestic capital market. He said the money to be raised will support the bank’s increased developmental lending activities.

“We already got the approval of the BSP (the central bank), and so we can issue the Tier-2 notes before the quarter ends,” he told reporters at the sidelines of the bank’s 65th anniversary celebration on Friday.

Del Rosario said four institutions—BDO Capital, BPO Capital, ING Bank and Deutsche Bank—will arrange the sale of the securities, which will have a 10-year maturity.

Bank officials expect the debt offering to be received well by the market, noting the currently high liquidity among corporate investors. They also deem the bond sale timely because of the current low-interest rate environment.

The money to be raised from the securities sale will benefit several of the bank’s big-ticket lending initiatives this year, Del Rosario said.

PPP funder

He said the DBP has been tapped by the national government to help support big-ticket infrastructure projects under the public-private partnership (PPP) program, which invite private firms to invest in public infrastructure projects.

The role of DBP in the PPP is to provide loans to potential investors.

Del Rosario said that with its participation in PPP projects, the bank’s total loan portfolio is expected to grow at double-digit rates this year.

The banking industry expects credit to grow between 15 and 20 percent this year on the back of heightened demand both from consumer and corporate borrowers, and of the banks’ high liquidity enabling them to lend more.

Total loan portfolio

The DBP’s total loan portfolio amounted to P180 billion at the end of 2011, up by about 16 percent from P155 billion the previous year.

Del Rosario said that although the bank lent aggressively last year, it was able to keep its exposure to bad debts at a comfortable level of below 3 percent.

The bank also has sufficient buffer against potential credit losses, noting that its capital adequacy ratio (CAR)—the proportion of capital to risk-exposed assets—stood at 18.97 percent by the end of last year, higher than the minimum of 10 percent required by the central bank.