IPO expected to strengthen Land Bank and DBP

Manila, Philippines The initial public offerings (IPOs) of the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP) could help the two state-owned banks better fulfill their respective mandates by leveraging new capital to strengthen their balance sheets and improve governance.

“IPOs can raise funds from the public market to strengthen their respective balance sheets,” said Calixto Chichiamco, president of the Foundation for Economic Freedom, a policy advocacy group.

Chikiamco added: “Public listings will also help bank governance as bank management and boards will have to be accountable not only to the government but also to private shareholders.”

read: It’s official: DBP and Land Bank no longer merging

Finance Secretary Ralph Recto spoke at a reception hosted by the Philippine Stock Exchange (PSE) on Wednesday, a transcript of which was released by the Department of Finance on Thursday. Ralph Recto said the government was “exploring” amendments to the charters of the Land Bank and DBP, including their possible public listing “to broaden the local capital market.”

capital market reform

Leto assured the PSE that the Marcos administration would implement capital market reforms to further strengthen investor protection and encourage more investment.

The finance minister raised the idea of ​​an initial public offering a week after announcing the government's decision to cancel plans to merge two state-owned banks, saying “their mandates are completely different”.

read: Business Hot Topic: Land Bank to decouple from DBP

DBP is a development bank that supports agricultural and industrial enterprises, especially small and medium-sized enterprises, while the Land Bank's mission is to promote rural development and provide credit to small farmers, fishermen and land reform beneficiaries.

Based on data as of the end of September 2023, if the merger is successfully completed, the combined assets of Land Bank and DBP will reach P4.07 trillion, with deposits of P3.59 trillion and loans of P1.82 trillion.

That means the merged bank could be as big as BDO Unibank, the country's largest bank. But critics of the move say merging the two banks would simply create a giant government bank too big to fail.

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