Govt urged to set example by merging LandBank with DBP

By Jun Vallecera

Reporter

The government-owned Development Bank of the Philippines and sister firm Land Bank of the Philippines are better off merged than operating independent of each other, according to US-based investment banking firm Bear Stearns. In a paper published out of Singapore, Bear Stearns analyst John Stuermer said while talks of possible merger are just that, consolidating the Philippine banking system would accelerate if  the government “sets the example.” “Such a consolidation may not happen in the near term, although we believe the government would be in a much better position to encourage consolidation of private-sector banks if it sets a good example by consolidating the public sector banks,” Stuermer said. The policy thrust favors fewer but stronger banks to be able to hold their own against regional competitors. Stuermer notes the Metropolitan Bank and Trust Co, the country’s largest, has assets of only $12 billion, just a fraction of that held by two of Singapore’s biggest banks totaling about $100 billion and three of Korea’s largest which have combined assets of some $200 billion. Fusing the resources of LandBank and DBP puts the government in a better position to execute the massive P1.7-trillion medium-term infrastructure development program than if the various government departments were to pursue them individually, according to Stuermer. He noted DBP has a low loans-to-assets ratio, although its loans-to-deposits ratio was high. “[DBP’s] balance sheet could easily support a higher loan volume but is overly dependent on borrowing to fund itself due to its rather limited deposit base. “LandBank has a much larger deposit base, reflecting a branch network of some 340 branches compared with around 80 branches for DBP. “Thus, the combined entity would have a higher ratio of loans to assets and a lower ratio of loans to deposits,” the analyst said. Finance Secretary Margarito Teves first bared the merger plan more than a year ago and acknowledged the work to be done remains formidable. Merger requires amending the charter of each bank via legislation. DBP chief Rey David said he supports the planned merger due to its many advantages but would let the government decide on the timing.

 

 

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