LAND BANK of the Philippines (LANDBANK) merger with United Coconut Planters Bank will result in combined assets worth PPA 3 trillion by year end, with regulatory relief expected to help the surviving entity overcome the financial impact of the transaction.

“The merged assets will significantly increase LANDBANK’s loan portfolio aimed at serving the entire agricultural sector, especially coconut producers, alongside major development industries. The synergy created by the merger will put us in a much better position to meet the changing needs of our diverse customer base, especially the underserved and unbanked, ”said LANDBANK President and CEO Cecilia C. Borromeo, quoted in a press release on Sunday.

Executive Decree (EO) No 142 signed by President Rodrigo R. Duterte on June 25 approved the LANDBANK-UCPB merger. All the assets and liabilities of the UCPB will be transferred to LANDBANK.

The merger was considered because of the two banks’ common goals and interdependent mandates, the OE said. LANDBANK mainly lends to the agricultural sector, while UCPB was initially acquired by the government for the benefit of coconut producers.

The provisions of the ordinance are expected to be fully implemented within six months of its entry into force.

LANDBANK’s assets reached 2,405 billion pesos at the end of March, the second largest in the industry. Meanwhile, the latest central bank data showed UCPB assets stood at 327.39 billion pesos as of December 2020.

The lender said it had done due diligence and asked the Bangko Sentral ng Pilipinas and the Monetary Board to review and approve the processes and transactions to be involved in the merger.

LANDBANK said its impending acquisition of the shares, assets and liabilities of UCPB will also increase its own deposits, loans and capital.

He said based on initial projections, its post-merger Tier 1 capital ratio will remain above the minimum of 11% required by the BSP.

Ms Borromeo said that she also asked the BSP to grant LANDBANK incentives generally given to banks undergoing merger and consolidation.

She said the relief measures would give the bank more flexibility in managing its capital, help it achieve operational efficiency and minimize the expected impact of the merger on its balance sheet.

“LANDBANK is more than capable of absorbing the financial impact of the merger with UCPB. Our ratios will remain comfortably above the standards set by the BSP, ”said Ms. Borromeo.

Fitch Ratings said on Thursday that the proposed merger between the lenders would likely affect LANDBANK’s credit profile and profitability in the near term due to the poor financial health of the UCPB and its stock of bad loans.

A technical working group will be in charge of the merger integration plan. It will include Ms. Borromeo from LANDBANK and Liduvino S. Geron, head of UCPB. Representatives of the Commission on Governance of State Owned and Controlled Companies, the Securities and Exchange Commission, the Department of Finance, the Department of Budget and Management and the Audit Commission will also be part of the team.

“LANDBANK and UCPB customers are assured that banking services will continue to be hampered throughout the ongoing merger process with deposits remaining intact and secure in their current service branches,” LANDBANK said. – LWTN