Possible Landbank, DBP IPO seen as a good move

MANILA, Philippines An initial public offering (IPO) would be credit positive for both Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP), according to Fitch Ratings.

But the global credit watcher, in an emailed answer to questions from the Inquirer, said the Philippine government must keep its controlling stake in the two banks in the event of a share sale.

“An IPO that significantly improves the capital positions of the banks could be positive for their standalone credit profiles,” Fitch Ratings said.

Finance Secretary Ralph Recto last week said the government is “exploring” amendments to the charters of Landbank and DBP, including their possible public listing “to broaden the local capital market.”

READ: IPO seen to strengthen LandBank, DBP

Landbank and DBP currently hold a triple B credit rating from Fitch, matching the investment grade rating of the Philippine government. While an IPO would give the banks another option to raise capital, Fitch explained that Landbank and DBP’s creditworthiness is still anchored in the support they get from the government.

That said, a stock market debut “is not going to enhance their support-driven ratings,” Fitch said.

“Our assessment of government support is predicated on the policy roles that these two banks have and the state’s ownership in them,” the agency said.

”Any stake sale that brings the state’s ownership in the banks below 50 percent could bring into question the state’s commitment in the long-term roles of the two banks, although that is not our current expectations,” it added. INQ