Higher capital needed after Maharlika infusions

Amid concerns that the International Monetary Fund (IMF) raised on state financial firms’ contributions to the sovereign wealth fund, the Department of Finance (DoF) had urged legislators to approve the new charters of the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP).

The charter revisions will also enable the banks to increase their capital through an initial public offer (IPO).

“To further strengthen the financial standing of state banks, the DoF is advocating for Congressional approval of amendments to the charters of LandBank and DBP,” DoF said in a statement released Thursday.

The statement came after the IMF suggested to LandBank to craft recapitalization plans to compensate the P50-billion capital it transferred to the Maharlika Investment Corp. (MIC), the manager of Maharlika Investment Fund or the country’s first sovereign wealth fund.

Finance Secretary and MIC chairperson Ralph Recto said LandBank continues to register a strong capital adequacy ratio of 16.42 percent as of November 2024, higher than the 10 percent threshold set by the Bangko Sentral ng Pilipinas (BSP).

Meanwhile, DBP, which also contributed a P25-billion initial capital for the sovereign wealth fund, posted a capital adequacy ratio of 14.78 percent.

P300-B capital for DBP

“The solid financial footing of LandBank and DBP reaffirms their indispensable role in advancing the nation’s progress. This allows them to continuously adhere to prudent financial management practices and effectively utilize their resources to deliver more support to Filipinos, especially in key sectors like infrastructure, agriculture, fisheries, and micro, small and medium enterprises,” Recto said.

In March, DBP said it plans to increase its authorized capital stock from P35 billion to P300 billion.

Last year, DBP president and chief executive officer Michael de Jesus said the bank was eyeing to expand funding to startups in “sunrise” industries.

“DBP is one with the National Government in filling the financing gap especially for emerging and so-called sunrise industries that are heavily anchored on innovation and technology,” he said.

The sunrise industries include information and communications technology, tourism, health, logistics and creatives or arts.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co. and multi-awarded financial markets analyst, said the initial public offer could help the DBP raise more capital to lend to more borrowers and broaden its presence across the country.

However, he cautioned the DBP will have to make better practices on financial management to maximize proceeds from the IPO.

“The success of an IPO can be influenced by market conditions, investor sentiment, and broader economic factors, which may not always be favorable, especially during periods of market volatility,” Ravelas said.

“Publicly listed companies are subject to stringent regulatory requirements, including financial reporting, disclosure, and compliance with securities laws, which can increase administrative burden and costs,” he added.

To encourage more Filipinos to start learning about investing, House Speaker Martin Romualdez proposes to Congress to lower taxes on stock transactions with Filipino companies and equalize dividend tax.