MALACAÑANG is expected to issue this month an executive order (EO) approving the planned combination of Land Bank of the Philippines and Development Bank of the Philippines (DBP), paving the way for the two state banks to be “legally merged” by November this year.
According to Finance Secretary Benjamin Diokno, once combined, Landbank and DBP would account for P4.18 trillion in assets, P3.59 trillion in deposits, and P288 billion in capital — based on figures as of Dec. 31, 2022. This means the merged bank will be the biggest in the country.
Diokno, in a press briefing, said based on a timeline for the controversial merger, the Governance Commission for Government-Owned or -Controlled Corporations (GCG) should have approved the union in April.
The GCG indeed submitted a report to the Office of the President last month, which affirms that a merger does not need a new law passed in Congress. The GCG also said existing laws had given the President the authority to implement such a merger.
However, the GCG later clarified that there was “no decision” yet on the Landbank-DBP merger, and that it welcomed any inquiry on the matter in Congress in aid of legislation.
Still, Diokno said that by September, an operational integration plan would have been jointly crafted and approved.
By October this year, the Monetary Board is expected to approve the merger.
“The merger [would] create a bigger and stronger bank to better serve the country’s development needs,” Diokno said.
He added that a consolidated book will also allow the merged entity to withstand shocks arising from financial and economic stress.
The finance chief, who is strongly pushing for the merger, also said combining the two banks would eliminate redundancy and inefficiency in operations, leading to projected savings of P5.3 billion yearly.
The estimate is conservative as it does not include revenues from the sale of redundant assets of DBP’s various properties such as its head office in Makati City, and a property in Bonifacio Global City, as well as various branch properties, equipment and licenses.
One expected effect is that 125 or 85 percent of DBP’s 147 branches “will most likely be permanently closed.”
The rationale for this is that only 22 of DBP’s branches are located in local governments where there are no existing Landbank branches.
Assuming that 75 percent or 110 of DBP branches will be considered redundant, the merger will generate savings of up to P975 million per year through consolidation of branch operations.
He added 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 that are normally coursed through the government financial institutions.
Diokno was referring to services like the distribution of conditional cash transfers, tax and fees collection, servicing of payroll of government offices, and others.
He said the improved financial position of the merged entity will provide a bigger headroom for loans that can be used for development projects.
“This loan size will aid Landbank and DBP in realizing their mandates, and will allow bigger lending for the government’s priority projects,” Diokno said.
The differing mandates, and the need for an entity dedicated to fulfill such mandates, is an argument that DBP management and employees use in opposing the merger.
Meanwhile, Landbank describes its major roles as carrying out a mandate to promote countryside development, and providing credit assistance to small farmers and fisherfolk, and agrarian reform beneficiaries.
But Diokno said this was not a problem, considering that both banks are classified as universal banks. (Ronnel W. Domingo © Philippine Daily Inquirer)
