Land Bank of the Philippines, or LandBank, on Sunday said it remains adequately capitalized despite its transfer of a P50-billion fund to the Maharlika Investment Corporation or MIC as seed capital for the Maharlika Investment Fund.

"Even with the bank's P50-billion seed capital to the MIC as mandated by Republic Act 11954, otherwise known as the Maharlika Investment Fund Act of 2023, the bank will meet its capital adequacy ratio requirements by the Bangko Sentral ng Pilipinas or BSP," LandBank said in a statement to the media.

EO eases bank's plight

The Palace also recently released Executive Order 43 adjusting the dividend rate of LandBank required to be remitted to the Bureau of Treasury to zero percent from the current 50 percent of its annual earnings.

"The adjusted dividend rate set forth in Section 1 of this Order is applicable only to the LandBank for calendar year 2022," the EO read.

Upon the recommendation of Finance Secretary Benjamin Diokno, the downward adjustment was made "in the interest of national economy and general welfare."

BSP Governor Eli Remolona Jr. also said last week that LandBank, along with another state financial institution Development Bank of the Philippines, or DBP, applied for a regulatory relief as its capital base was adjusted due to the funding requirement for the Maharlika Investment Fund.

"They are providing essentially capital which reduces their equity which may put them non-compliant with our capital requirements," he said.

"In principle, we can provide forbearance which means to allow them not to comply for a period of time. This is what's done elsewhere but they will be expected to comply at some point," the central bank chief continued.

So far, Remolona said LandBank remains compliant with the BSP's capital adequacy ratio or CAR requirements.

The LandBank reasoned it has acquired excess capital, with higher than the regulator's minimum CAR requirements as of mid-year.

LandBank reported its CAR reached 16.61 percent, higher than the 10 percent requirement.

Meanwhile, its Common Equity Tier 1 Ratio settled at 15.73 percent, higher than the required 10.25 percent.

"Both capital ratios are essential as it indicates a bank's financial strength and how well it can weather financial challenges. A higher CAR means a bank is more financially stable and secure," LandBank explained.

LandBank said its capital grew by 14 percent to P236.3 billion this year, up from P206.5 billion last year.

Albay 2nd district Rep. Joey Salceda said the public has nothing to worry about the capital contributions of LandBank and DBP to the sovereign fund as their request for regulatory relief is mainly a procedural matter.

"The nature of the relief will probably be to include their exposure to Maharlika as 'admissible' under the risk-weighting system of the BSP.

H1 assets hit P3T

That is simply because prior to Maharlika, "we did not have this kind of vehicle in the country," the lawmaker and supporter of the sovereign fund said.

The bank added its total assets in the first half this year reached P3 trillion or 7.9 percent higher than the P2.8 trillion last year.

Through its various investments, LandBank said its net income figured at P20.9 billion, exceeding the bank's mid-year target by 19 percent.

As a major lender to the agriculture sector, LandBank said it continues to mobilize funds, resulting in a total of P713.8 billion outstanding loans for agriculture and rural development as of end-June.

LandBank said this amount represented 69 percent of its total loan portfolio worth P1.04 trillion, or almost triple the required 25 percent allocation of local banks to agriculture, fisheries and rural development.