PRESIDENT Ferdinand R. Marcos, Jr. supports the merger of state-run lenders Land Bank of the Philippines (LANDBANK) and Development Bank of the Philippines (DBP), Finance Secretary Benjamin E. Diokno said.

“The merger will take effect before the end of the year,” he told a Palace briefing after a meeting with Mr. Marcos on Tuesday.

Mr. Diokno said the merger of the two state-run banks would create the “number one bank in the Philippines,” overtaking Sy-led BDO Unibank, Inc. (BDO) as the largest lender in terms of assets.   

“The President expressed the desire to merge the two [banks], to make it the biggest bank of the country because of the recent financial developments abroad. And that’s really the best practice: the biggest bank is usually owned by the state,” he said.

Mr. Diokno said the President instructed them to ensure “none of the services provided by either bank will be lost” during the merger process.

“We assured him that with the merger, because both the LANDBANK and DBP are universal banks, they do almost the same, except that one is focused on agriculture and the other one on industrial projects,” the Finance official said. 

Mr. Diokno said the merger will result in savings for the government of about P5.3 billion per year or at least P20 billion for the next four years.

“This is even understated because this does not include revenues that can be derived from the sale of redundant assets of DBP’s various properties such as its head office in Makati, a property in BGC (Bonifacio Global City), various branch properties, equipment and licenses, and income that can be derived from the proceeds of such sale,” he added.

LANDBANK, which would be the surviving entity, has 752 branches nationwide while DBP has 147 branches.

Only 22 branches of the DBP will be retained, Mr. Diokno said.

However, the merger of the two banks would lead to retrenchment of workers.

“Definitely jobs will be lost because of the redundancy and the branches will be reduced,” Mr. Diokno said, adding that any affected employees would be given “attractive” packages.

Enrico P. Villanueva, senior lecturer of economics at the University of the Philippines Los Baños, said the move would lead to a “stronger, well-capitalized, government development bank.”

Mr. Villanueva said in a Facebook Messenger chat that there will be efficiency gains from the merger.

“We have seen that acquiring other banks usually bodes well — there will be more assets to mobilize, more accessibility to the public,” Luis A. Limlingan, head of sales at Regina Capital Development Corp., said via Viber.

“Absorbing the top professionals to run the surviving entity would be extra help,” he added.

When he was running for vice-president in 2016, Mr. Marcos said merging the two state-run banks would result in a commercial bank, removing their ability to provide loans for farmers.

Mr. Diokno, however, said Mr. Marcos might have changed his position due to recent “international developments.”

“I know that he was for this proposal,” he said.

The global banking sector has been rattled by the collapse of Silicon Valley Bank and Signature Bank in the United States, and the rescue of Credit Suisse.

The Bangko Sentral ng Pilipinas (BSP) has assured the banking system is strong and “prepared to withstand possible shocks” arising from the failure of these US banks.

Assets of the Philippines’ largest banks grew by nearly 10% in the fourth quarter of 2022, according to the BusinessWorld’s quarterly banking report released in January.   

BDO remained the largest bank in terms of assets with P4.01 trillion as of the fourth quarter of 2022, followed by state-owned LANDBANK with P3.16 trillion and Metropolitan Bank & Trust Co. with P2.92 trillion.

Mr. Diokno said merging the two state-run banks would free up public funds that could be used for socioeconomic programs.

He also said the plan is consistent with the Marcos administration’s rightsizing initiatives.

“We’re not saying that the current system is broken, but as policy makers we have to constantly seek better ways of doing things especially if we want to improve the performance of a particular government agency.” — Kyle Aristophere T. Atienza