Fitch: Landbank, DBP to face credit woes sans relief
The credit strength of Land Bank of the Philippines (Landbank) and Development Bank of the Philippines (DBP) may weaken after their hefty contribution to the Maharlika Investment Fund (MIF) if no mitigating measures are put in place to help the two state-run banks shore up their defenses against potential losses, Fitch Ratings warned on Thursday. Tamma Febrian, director at Fitch Ratings’ Asia-Pacific Financial Institutions team, said the debt watcher had already taken into account a possible decline in Landbank and DBP’s buffers against possible losses when it affirmed the two lenders’ triple-B credit rating last April. If not fixed, Febrian explained that liquidity problems may eventually hurt Landbank and DBP’s lending activities. READ: No special treatment for DBP and Landbank, says BSP chief Landbank is the country’s biggest credit provider to the agriculture sector and rural development, which cornered 69 percent of the bank’s P1.04-trillion loan portfolio in the first half. During the same period, 56 percent of DBP’s total loan portfolio of P507 billion was used to bankroll public infrastructure projects. “Our general view is that LBP and DBP’s underlying loss absorption buffers are poised to weaken on the back of their contribution to [the MIF], irrespective of regulatory forbearance that may be provided to the banks,” Febrian said. BSP relief “This may also pressure their standalone credit strengths, in the absence of other mitigating factors,” he added. Given Landbank and DBP’s growing policy role, however, Fitch’s Febrian said he still sees the government immediately helping the banks should they need it. “We do not expect this to have any significant bearing on our view of the state’s propensity and ability to support the banks,” he said. Landbank and DBP earlier sought regulatory relief as their contribution to the MIF might make them noncompliant with the capital requirements set by the Bangko Sentral ng Pilipinas (BSP). Landbank last month remitted to the Bureau of Treasury its P50-billion contribution to the MIF while DBP turned in P25 billion. While the lenders still met the capital requirements of the BSP after the investments in the wealth fund, Landbank and DBP had requested for regulatory relief as a “preemptive” measure. The BSP had said that it was amenable to granting a temporary reprieve to the state-run banks, with BSP Governor Eli Remolona Jr. noting that the amount that Landbank and DBP contributed to the MIF reduced their liquidity and risked making them
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