State-run Development Bank of the Philippines (DBP) dismissed a proposal to merge with Land Bank of the Philippines, with its top executive arguing that the consolidation of the two state-run lenders would not create a stronger financial institution.

On the sidelines of the Association of Southeast Asian Nations (ASEAN) editors and economic opinion leaders forum on Tuesday, Feb. 24, DBP President and Chief Executive Officer Michael de Jesus said the two entities should instead focus on individual capital build-ups to better serve their respective roles in the economy.

“It doesn’t make sense to have a merger as the two banks have different mandates,” de Jesus told reporters.

While some overlap exists in their operations, he noted that the merger is not a guaranteed path to increased institutional strength.

“Strengthen both banks. They have distinct mandates, even if there is some overlap. Merging them will not necessarily make them stronger,” he said.

De Jesus’ comments come amid renewed scrutiny of the state-owned lenders' roles in the national financial landscape.

Land Bank President and CEO Lynette Ortiz said in a separate interview that her management team has yet to receive formal guidance on a potential tie-up.

Ortiz noted that the bank remains focused on its current operations and will follow the Department of Finance’s (DOF) direction.

“As far as I am concerned, we don’t know anything about how that will proceed,” Ortiz said. “We will merely follow direction and instruction from our board and our chairman, who is Finance Secretary Frederick D. Go,” Ortiz said.

A central argument for the merger has been DBP’s exposure to non-performing loans, with proponents suggesting that restructuring the two banks into a single entity could mitigate those risks. DBP is currently managing ₱36.2 billion in bad loan exposure.

However, de Jesus defended the bank's asset quality, noting that the rise in soured loans is the byproduct of DBP’s specific role as a developmental lender.

DBP frequently enters high-risk transactions that private domestic lenders often avoid, acting as catalyst for projects beneficial to the environment and national infrastructure.

De Jesus said the bank's strategy is to step into deals first to encourage private sector participation later. Despite a non-performing loan ratio of five percent to six percent—nearly double the banking industry’s 2025 average of 3.08 percent—the DBP chief maintained that the bank’s financial health remains robust.

He noted that the bad loans are 100 percent provisioned, meaning for every peso of soured debt, the bank holds an equivalent amount in reserves.

The Philippine banking industry has seen a steady improvement in asset quality, with the system-wide NPL ratio hitting a multi-year low of 2.84 percent at the end of 2025.

While DBP's metrics lag the broader industry, de Jesus insisted the bank remains “very strong and very safe” due to its aggressive provisioning strategy.