THE slated merger between Land Bank of the Philippines (LandBank) and United Coconut Planters Bank (UCPB) will result in combined assets totaling close to P3 trillion by the end of the year, proving that the merger will be beneficial for both parties, LandBank said.
“The merged assets will significantly grow LandBank’s loan portfolio directed at servicing the whole agriculture sector, especially coconut farmers, alongside key development industries,” LandBank President and CEO Cecilia C. Borromeo was quoted in a statement as saying. “The synergy created by the merger will provide a much better position for us to respond to the evolving needs of our diverse clientele, especially the underserved and unbanked.”
In an earlier analysis, Fitch Ratings Inc. warned that the merger may have a negative impact on LandBank’s credit profile.
“UCPB has been under a long-drawn rehabilitation program because of its weak financial health but its size relative to LandBank could significantly weaken the larger bank’s financial profile, as it would make up about 14 percent of LBP’s assets, based on our preliminary understanding of the pro forma merged entity,” Fitch Ratings has said.
However, in a statement issued over the weekend, Borromeo said the merger will “solidify” LandBank’s place as the second-largest bank in the country in terms of assets.
“LandBank is more than capable of absorbing the financial impact of the merger with UCPB,” Borromeo said. “Our ratios will remain comfortably above the standards set by the BSP.”
Based on LandBank’s initial projections, the combined Common Equity Tier 1 ratio by end-2021 of the merged banks will remain higher than the 11-percent regulatory requirement of the BSP. The bank also said it is requesting for regulatory incentives being granted by the BSP to banks for mergers and consolidation.
“These relief measures will provide the bank the flexibility to manage its capital, achieve operational efficiency and minimize the expected impact of absorbing UCPB,” Borromeo said.
Just last week, President Rodrigo Duterte approved Executive Order 142, ordering LandBank and UCPB to enter into a merger. The detailed structure of the merger, however, is yet to be determined.
State-run LandBank reported early June that despite the economic recession, its assets grew 16.14 percent to P2.405 trillion in the first quarter of the year, from P2.071 trillion in the same period last year.
The bank attributed the increase in assets to the 16.21 percent growth in deposits to P2.123 trillion from P1.827 trillion in 2020.