Dividend rates of gov’t banks slashed

PRESIDENT RODRIGO R. Duterte has issued an executive order (EO) reducing the dividend rates of Land Bank of the Philippines (LANDBANK) and Development Bank of the Philippines (DBP) to improve the banks’ capital position.

By authority of Mr. Duterte, Executive Secretary Salvador C. Medialdea signed on Aug. 28 EO No. 89 titled: “Adjusting the dividend rate of selected government-owned or -controlled corporations (GOCCs) pursuant to Section 5 of Republic Act No. 7656.” Copies of the EO were released to reporters on Monday.

From at least 50%, the President’s EO reduced the dividend rate of LANDBANK to 10% for its earnings in 2016 and 2017, and DBP to 0% for its earnings in 2017.

The EO noted that under RA 7656 which requires all GOCCs to declare and remit at least 50% of their annual net earnings to the national government, the President, upon the recommendation of the Secretary of Finance, may adjust the dividend rates “in the interest of economy and general welfare.”

In a phone message to reporters, Finance Secretary Carlos G. Dominguez III said he recommended the said adjustments “to improve [the banks’] capital position so they can better fulfill their mandates.”

The EO said the liquidity, capital position, medium-term plans and programs of both LANDBANK and DBP “were considered in the determination of their respective reasonable dividend rates or net earnings for selected years.”

In his State of the Nation Address in July, Mr. Duterte threatened to abolish LANDBANK for supposedly neglecting its mandate to finance agricultural projects and endeavors, criticizing the bank for being “mired with so many commercial transactions.”

LANDBANK has said it is the only bank compliant with the Agri-Agra Law. Republic Act 10000 or the Agri-Agra Reform Credit Act mandates banks to allot at least 10% of their total loanable funds to agrarian reform beneficiaries and 15% for farmers and fisherfolk.

Data provided to reporters showed LANDBANK’s exposure to the agriculture and fisheries sectors amounted to P177.32 billion as of end-June, 22.17% of the lender’s total loan portfolio of P799.64 billion — 16.8% higher than P151.78 billion recorded as of June 2018.

This is on top of the P42.31 billion lent to the “mandated” sector, which includes small farmers including agrarian reform beneficiaries and their associations (P42.17 billion) as well as small fishers and their associations (P140 million).

Last month, the bank said it was looking to increase its loan to the agriculture sector by 20% by 2020 through “intensified efforts.”

DBP, which is the eighth-biggest bank in the country, has been assigned as the government’s infrastructure bank by the Duterte administration. It is largely meant to provide credit lines to construction projects, including big-ticket items on the “Build, Build, Build” pipeline.

It is also tasked to extend loans to micro, small and medium enterprises, social services and community development, and the environment.

In its report last April, DBP said it made a P5.72-billion profit last year, up by 4.2% from the P5.49-billion bottom line in 2017. Total loans stood at P328.93 billion, which grew 12% higher than the P293.82 billion outstanding credit lines as of end-2017. A third of these loans were channelled to infrastructure and logistics, totalling P110.52 billion. — Arjay L. Balinbin