It’s official: No more DBP-Landbank merger

Landbank and DBP (INQUIRER FILES)

MANILA, Philippines  -The Marcos administration is abandoning its plan to merge Development Bank of the Philippines (DBP) and Land Bank of the Philippines, a turnaround from a previous bid to create a supersized government financial institution.

“To me, it’s as simple as I think we need two government depository banks,” Finance Secretary Ralph Recto told reporters in an interview on the sidelines of the 122nd founding anniversary of the Bureau of Customs on Tuesday.

“Their mandates are totally different. So I think we’re better off with two of them,” Recto added.

READ: DBP-Landbank merger’s fate

Had the merger pushed through, Landbank and DBP would account for P4.07 trillion in combined assets, P3.59 trillion in deposits and P1.82 trillion in loans, based on figures as of end-September 2023. This means the merged bank could be as large as BDO Unibank, the country’s largest bank.

Removing redundancy

DBP is a development bank that supports agricultural and industrial enterprises, especially small- and medium-scale firms.

Meanwhile, Landbank is mandated to promote countryside development and provide credit to small farmers, fisherfolk and agrarian reform beneficiaries.

Recto’s predecessor, Benjamin Diokno, had pushed for the union of the two banks, arguing that the merger would eliminate redundancy and inefficiency in operations, leading to projected savings of P5.3 billion yearly.

Diokno had also said that the generated savings can be used to improve existing branches or open new ones where the new bank is not yet present, or improve accessibility for better delivery of services, like the distribution of conditional cash transfers, tax and fees collection and servicing of payroll of government offices.

But critics of the move said merging the two lenders would likely create a mammoth government bank that would be too big to fail.

Different missions, corporate cultures

Calixto Chikiamco, president of Foundation for Economic Freedom, agreed with the new plan to scrap the merger.

“It’s the right decision. DBP and LandBank have vastly different missions and corporate culture,” Chikiamco said in a Viber message.“

A merger would not have led to positive synergy and [instead] would cause undue concentration of government banking assets in a single institution,” he added.

READ: Maharlika chest at P107 billion; ‘gains seen in 4-5 years’

DBP and LandBank are the major funders of Maharlika Investment Corp., the company that will create the Philippines’ first sovereign wealth fund.

In the same interview, Recto said their big contribution to Maharlika would unlikely hurt these lenders.

“They’ll be okay. If they have dividends this year, then those dividends can be part of retained earnings. It should be used to increase their capital anyway,” the finance chief said.