MANILA, Philippines —An initial public offering (IPO) by Land Bank of the Philippines (LandBank) and Development Bank of the Philippines (DBP) could help the two state-run banks better perform their respective mandates by strengthening their balance sheet with fresh capital and improving governance.
“An IPO can raise capital from the public markets to strengthen their respective balance sheets,” said Calixto Chikiamco, president of Foundation For Economic Freedom, a policy advocacy group.
“Being publicly listed will also help in bank governance as the management and board of the banks must answer not only to the government but also to private shareholders,” Chikiamco added.
READ: It’s official: No more DBP-Landbank merger
Speaking at a reception hosted by the Philippine Stock Exchange (PSE) on Wednesday, a transcript of which was released by the finance department on Thursday, Finance Secretary Ralph Recto said the government was “exploring” amendments to the charters of LandBank and DBP, including their possible public listing “to broaden the local capital market.”
Capital market reforms
This was as Recto assured the PSE that the Marcos administration would implement capital market reforms that will further enhance investor protection and encourage more investments.
The finance chief floated the idea of an IPO a week after announcing the decision of the government to scrap a plan to merge the two state-owned banks, arguing that “their mandates are totally different.”
READ: BIZ BUZZ: Landbank-DBP uncoupling
DBP is a development bank that supports agricultural and industrial enterprises, especially small- and medium-scale firms, while Landbank is mandated to promote countryside development and provide credit to small farmers, fisherfolk and agrarian reform beneficiaries.
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 biggest bank. But critics of the move said merging the two lenders would only create a mammoth government bank that would be too big to fail.