No DBP window dressing

This refers to the Biz Buzz column titled “Window dressing” (Inquirer, 2/2012) by Daxim Lucas. Lucas alleged that the Development Bank of the Philippines’ 2011 “accomplishments may have been due to window dressing, aimed to burnish the image of the new management.” He specifically mentioned the bank’s record-high dividends of P4 billion.

To set the record straight, there was no window dressing.  DBP earned a net income of P4.02 billion in 2011, exceeding its income target of P3.73 billion by 8 percent, boosted by an increase in its loans and investments. DBP’s 2011 net income was the second-highest recorded in its 65-year history.

Furthermore, DBP’s gross loan portfolio increased by 16 percent in 2011, from P155.26 billion in 2010 to P180.32 billion. Deposit levels increased by 21 percent in 2011, from P130.7 billion in 2010 to P158.37 billion. Total resources increased to P340.06 billion, an improvement of P42.94 billion from P297.09 billion in 2010, beefed up chiefly by the hike in the bank’s investments, loan portfolio and deposit liabilities.  Capital adequacy ratio based on Basel II remained at 18.97 percent as of December 2011, which is significantly higher than the 10 percent mandated by the Bangko Sentral ng Pilipinas.

It is therefore inaccurate to say that DBP reduced provisions for reserves to lower-than-industry standards in order to increase its net income. The bank has continuously booked reserves provisions based on an annual assessment of its portfolio to sufficiently cover potential losses. In fact, to strengthen its balance sheet, DBP aggressively made provisions in 2010 of P1.3 billion, and P840 million in 2011 (versus P642 million in 2008 and no provisions in 2009).  This has resulted in a higher NPL [non-performing loan] coverage ratio from 95 percent at end 2010 to 115 percent at end 2011.

On the other hand, DBP’s dividend payment of P4 billion is in accordance with Republic Act 7656 (“An Act Requiring Government Owned and/or Controlled Corporations to Declare Dividends under certain conditions to the National Government and for other purposes”) which provides that all GOCCs shall declare and remit at least 50 percent of their annual net earnings to the national government with appropriate approvals from regulatory bodies. The computation of dividends payable to the national government is based on a formula—net income plus, among others, provisions for impairment losses, FX loss revaluation, gratuity pay, minus other deductible expenses/unrealized gains, i.e., charges to reserves/write-offs, FX gains, and actual losses on disposed acquired assets.

—LEONORA A. FERNANDEZ, first vice president, head, Corporate Affairs,

Development Bank of the Philippines,

[email protected]