PRESIDENT Rodrigo R. Duterte has approved the merger of United Coconut Planters Bank (UCPB) and Land Bank of the Philippines (LANDBANK), with the latter as the surviving identity.

Executive Order (EO) No. 142 signed by the President on June 25 said all assets and liabilities of UCPB will be transferred to LANDBANK, with the two banks expected to determine the mode of merger in consultation with the Governance Commission for Government-owned or Controlled Corporations and to secure the required regulatory approvals.

The order said the move “will significantly strengthen the capability to deliver financial services to the coconut industry and the entire agricultural sector, contribute to economic sufficiency, foster countryside development and financial inclusion, and promote stability in the country’s banking system.”

LANDBANK and UCPB on Tuesday said the merger will let the smaller bank benefit from the larger lender’s “reach and scale” and give farmers improved access to financial services.

The order will take effect immediately after it is published in the state magazine or in a newspaper of general circulation. The provisions in the EO are expected to be fully implemented within six months from its effectivity.

The merger was considered because of the two banks’ shared objectives and interrelated mandates, the EO said. LANDBANK mainly lends to the agriculture sector, while UCPB was originally acquired by the government for the benefit of coconut farmers.

UCPB has been under rehabilitation following the signing of a memorandum of agreement among the bank, the Republic of the Philippines, the Presidential Commission on Good Government, and the Philippine Deposit Insurance Corp. (PDIC). This involves financial assistance from the PDIC worth P12 billion in the form of capital notes, which were converted into special preferred shares at the same value.

PDIC’s board of directors on Feb. 8 approved the sale of these special preferred shares to LANDBANK, which are equivalent to 88.91% of voting shares in UCPB, The Monetary Board, in a resolution dated May 20, approved the transaction.

The EO directs the LANDBANK to acquire the outstanding special preferred shares held by PDIC in UCPB, “taking into account the recovery of PDIC’s financial assistance to the UCPB” as well as the valuation of the shares and LANDBANK’s return on equity.

LANDBANK and UCPB were also told to prepare and implement an integration plan “towards the full implementation of the merger, in accordance with existing laws and regulations.”

LANDBANK may likewise adopt a reorganization plan. LANDBANK and UCPB employees who may be separated from service due to the reorganization and merger may be entitled to incentives and benefits.

LANDBANK’s net income grew by 1.67% to P5.48 billion in the first quarter. Its assets stood at P2.405 trillion as of March.

It will remain as the country’s second-biggest bank in terms of assets and deposits once the merger is concluded, it said on Tuesday.

Meanwhile, latest central bank data showed UCPB’s assets were at P327.39 billion as of December 2020. — KATA