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Dominguez bucks merger of LBP, DBP

The merger of state-owned Land Bank of the Philippines and Development Bank of the Philippines may not push through under the administration of President-elect Rodrigo Duterte, according to incoming Finance Secretary Carlos Dominguez.

Dominguez said he was not inclined to pursue the merger of the two state-run banks which was approved by President Benigno Aquino III when he signed Executive Order 198 in February. The secretary of finance serves as chairman of LandBank.

“You know, first of all I don’t think you can do it by an executive order. But my initial opinion is if it was set up by legislation, how can you ignore legislation and not do it,” Dominguez told reporters in a media round table discussion on Friday. 

Dominguez said while the two banks were established through legislation, the merger should also be approved through legislation and not by mere executive order. 

Dominguez said the merger would not likely stand up in court. “You know if that was challenged in the court, they will lose,” he said.

The merger of the banks was expected to create a mega bank with total assets of P1.7 trillion, based on end-2015 Bangko Sentral data, challenging local tycoons’ dominance in the banking sector.  The merger would make the surviving entity the country’s second largest bank in terms of assets.

“Who cares? What is it to be number two? What is it to be number one? It doesn’t matter. If they provide the function, if they do it efficiently, that’s okay. I mean you are serving the public,” Dominguez said. 

Under the merger, LBP will be the surviving entity as the Governance Commission for GOCCs earlier determined the overlapping functions of the banks. 

Landbank is the country’s fourth largest bank in terms of assets at P1.2 trillion as of end-2015, while DBP ranks seventh with P508 billion.

EO 198 stated that the merger would further enhance the financing of priority projects and sectors such as infrastructure, public services, agriculture and small and medium enterprises. 

“The merger of DBP and LBP will provide better access and extend quality financial services and products to more unbanked and underserved areas,” the order read. 

Dominguez, however, said the two banks were built for two different purposes.  “First of all, both were created for different purposes. I don’t see any rational reason to put them together. One is that a development bank is to give long term finance. The skills you need to do that are very different from the skills you need to do short-term finance particularly for farmers,” he said. 

GCG submitted in April to Bangko Sentral ng Pilipinas and Philippines Deposit Insurance Corp. a final business plan for the merger.  

The EO, in justifying the merger, stated that “the functions of DBP and LBP duplicate and/or unnecessarily overlap with one another.”

The government will also infuse P30 billion into the merged bank to support its capital.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said a written consent from Philippine Deposit Insurance Corp. and the approval of Bangko Sentral were needed for the merger.

Land Bank posted a net income of P13.3 billion in 2015, up by 10 percent from P12.1 billion in 2014.  DBP earned P4.7 billion last year.

 

Topics: Land Bank of the Philippines , Development Bank of the Philippines , incoming Finance Secretary Carlos Dominguez
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