A senior lawmaker has high hopes the national government will receive bigger cash dividends from the Land Bank of the Philippines (LBP) after its planned merger with the Development Bank of the Philippines (DBP).
Surigao del Sur Rep. Johnny T. Pimentel said these dividends will support the government’s efforts to boost non-tax receipts to fund its programs.
“There’s no question that the business combination will create a larger [LBP] with a greater capacity to generate new earnings,” Pimentel said last Sunday. “The new earnings, coupled with operating cost savings, will enable [the LBP] to pay additional cash dividends on a regular basis to the national treasury in the years ahead.”
“This augurs well for the government’s efforts to boost non-tax receipts that are badly needed to support social development programs,” the lawmaker added.
According to Pimentel, LBP last declared and remitted to the treasury P8.5 billion in special cash dividends in June 2022, after posting a net income of P21.7 billion in 2021.
The bank recently reported a net income of P30.1 billion in 2022.
Finance Secretary Benjamin E. Diokno earlier said the merger of the two state-owned banks, with LBP as the surviving entity, is projected to yield at least P5.3 billion in annual operating cost savings, or no less than P20 billion in the next four years.
Both LBP and DBP are covered by Republic Act (RA) 7656, which requires government-owned or-controlled corporations (GOCCs) to declare as dividends and remit to the treasury at least 50 percent of their annual net profits.
The same law also empowers Malacañang to adjust the dividend rate higher or lower for any or all covered GOCCs, in the interest of the national economy and the general welfare.
During the Duterte administration, LBP’s dividend rate was reduced to zero percent for 2016, 10 percent for 2017, and then to zero percent again for 2018 and 2019.
The dividend-rate adjustments, combined with fresh equity infusions from the government, enabled the LBP to build up its capital reserves and provide low-interest loans to vulnerable sectors at the height of the Covid-19 pandemic.
LBP is the official depository of government funds, which account for 67 percent, or P1.9 trillion, of the bank’s total deposits.
The bank also has the social mandate to spur countryside development and extend credit to small farmers, fishermen and agrarian reform beneficiaries.
No opposition
THE merger of the two state lenders would not be opposed by the minority bloc, according to House Minority Leader and 4Ps Party-list Rep. Marcelino C. Libanan. However, Libanan said the minority bloc will only keep its peace if the merger would keep intact LBP’s mandate of providing direct credit support to small farmers and fishermen.
“We must stress that the LBP is duty bound to allocate at least 5 percent of its regular loan portfolio for socialized credit to agrarian reform beneficiaries, small farmers and fishermen,” he said.
“So long as this obligation to extend low-cost financing to farming and fishing communities is left unimpaired, we won’t get in the way of the proposed combination of the two banks,” Libanan added.
Libanan is also counting on the LBP to continue servicing the borrowing requirements of micro-sized, small-scale and medium-sized enterprises in the provinces.
LBP’s mission to promote countryside development has become absolutely imperative, considering that many private rural banks have collapsed over the years, according to Libanan.
Since 2012, the Bangko Sentral ng Pilipinas (BSP) has ordered the closure and liquidation of 123 troubled private rural banks across the country, based on the records of the Philippine Deposit Insurance Corp. (PDIC).
The government of President Ferdinand R. Marcos Jr. wants to merge LBP with DBP, with the former as the surviving entity, in a bid to achieve operating efficiencies and cost reductions.
LBP, which acts as the official depository of government funds, has 752 branches, 2,810 ATMs and over 10,000 employees. DBP has 147 branches, 836 ATMs and over 3,600 employees.
