Philippines president backs merger of two state lenders to create country's biggest bank

PHILIPPINES President Ferdinand Marcos Jr is pushing for the merger of two state-run banks, which will create the country’s largest lender by assets, his finance secretary said on Tuesday (Mar 28).

The planned merger, first approved by former president Benigno Aquino in 2016 but scrapped later that same year by his successor Rodrigo Duterte, was revived “due to recent financial developments abroad”, Finance Secretary Benjamin Diokno said.

The merger of Development Bank of the Philippines (DBP) and Land Bank of the Philippines (LBP) would also be in line with past government efforts for consolidation in the banking sector.

“The merger will create a bigger and stronger bank to better serve the country’s development needs,” Diokno said.

The global banking sector has been in turmoil since the collapse of two mid-sized US banks earlier this month, which prompted a rout in banking stocks and led to a takeover of 167-year-old Credit Suisse by its Swiss rival UBS.

The union of DBP and LBP would allow the government to save more than five billion pesos (S$122 million) in operating costs in the first year of their merger, Diokno said. It could be done through an executive order or by legislation, he added.

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As at end-September, the two banks had combined assets of 3.8 trillion pesos, compared with BDO Unibank’s 3.7 trillion pesos, which is controlled by the Philippines’ richest family, central bank data showed.

Central bank governor Felipe Medalla has given assurances that the local banking system remains strong. REUTERS