The new president and CEO of government-owned Land Bank of the Philippines (Landbank), Lynette V. Ortiz, said Fitch Ratings’ upgrade of the bank’s outlook to “stable” is a thumbs up for Landbank’s financial strength.
“The improved outlook from Fitch is a welcome vote of confidence for the bank’s robust financial stability and resilience to withstand external and domestic economic headwinds,” said Ortiz on Friday, June 9. She used to be CEO of British bank Standard Chartered Bank in the Philippines.
Ortiz also said that with “solid state backing” Landbank “will intensify (its) support to the country’s priority programs and initiatives.”
Ortiz replaced veteran Landbanker, former CEO Cecilia C. Borromeo who was also a former president and CEO of the Development Bank of the Philippines. Borromeo led both state-controlled banks that the Marcos government wants to merge, with Landbank as surviving entity.
Fitch, in a May 30 report, affirmed the Landbank’s Long-Term Issuer Default Ratings (IDRs) at “BBB” and Government Support Rating (GSR) at “bbb”.
Fitch based its upgrade on Landbank’s “strategic and growing policy roles, 100% state ownership as well as its systemic importance as the largest state-owned bank in the country, with market share of about 14% of system assets.”
It had previously noted in a May 22 report that the “state’s improving ability to support the bank, in times of need, as reflected in the revision of the sovereign rating outlook to stable.”
Landbank has P3.1 trillion assets which makes it the second largest lender in the country. Its deposit base is at P2.8 trillion as of end-March this year.
At the end of the first quarter, the government financial institution earned P10.8 billion but it was lower by 18 percent compared to P13.2 billion in 2022 which was boosted by non-recurring gains. Last year, the bank reported one-time gains from the merger with the United Coconut Planters Bank.
For 2023, Borromeo said previously that Landbank is targeting P35 billion net income. The P10.8 billion is about 30.8 percent of the income goal.
Landbank is being mandated by an impending law to fund the Marcos government’s Maharlika Investment Fund (MIF) with seed money amounting to P50 billion. DBP will also put in P25 billion while the Bangko Sentral ng Pilipinas (BSP) itself will contribute P50 billion.
BSP is tasked to grant regulatory relief measures to the two government banks but BSP officials said the reprieve will only come if they deemed it is necessary.
Once they are MIF funders, Landbank and DBP could breach capital ceilings imposed by the BSP in terms of bank investments and this could affect their capital base.
Borromeo has said that a BSP regulatory relief will be considered “major” because setting aside P50 billion as MIF seed money will have an impact on their capital adequacy ratio since that investment will be deducted from the bank’s capital when they compute CAR.