Doy Casuela on PAL, Meralco and Landbank

The Manila Times
Friday, December 11, 1998
Margarey Jao-Grey

Florido P. Casuela hasn’t had much of a rest since he took over last July as President and chief executive of Land Bank of the Philippines. Even his weekends are booked. Tomorrow, for example, Doy Casuela is heading for Narvacan in Ilocos supposedly to attend the town fiesta, but will actually talk to bank officers and bank clients. (Although Mr. Casuela hails from Surigao, his roots are genuinely Ilocano, thus the Narvacan invitation).

Yesterday, Mr. Casuela set aside 30 minutes to discuss Land Bank and bank-related issues. Here’s the juice:

•    Landbank will not put in additional equity into Philippine Airlines (PAL), but may be amenable to providing bridge financing so as long as PAL can show there’s money coming somewhere in the near term. Fact is, Landbank has recently added to the loan-loss provision for its PAL exposure, so if the national flag carrier declares bankruptcy tomorrow the bank will have completely covered the loss. Landbank and the Government Service Insurance System have 30-pecent direct stake in PAL.

•    Landbank will sell its equity in Manila Electric Company (Meralco) next year. The bank’s equity will be bunched together with those held by other government investors to maximize the selling price. Landbank has enough shares for one board seat. Even at today’s prices, Landbank will have made a profit on its Meralco investment.

•    Landbank has asked for capital infusion of between P10 billion and P11 billion from the national government. The capital infusion, which is most likely to come from the Miyazawa Fund of Japan, will be ready in 2000 after the congressional approval. (The Miyazawa Fund is a soft loan program. This means congress will have to agree to set aside money to pay the loan).

•    Landbank’s priority clients during President Estrada’s six-year term are cooperatives, local government units, rural bank and other financial institutions that do business in the countryside and small- and medium-sized enterprises. What’s new here is the emphasis on local government units, something it shares with the Development Bank of the Philippines (DBP). Landbank is also studying securitization deals with the local government units in Palawan.

•    Given its new priorities, Landbank will aggressively open new branches. Before the Central Bank decided to rethink its branching policy, Landbank had 18 applications that have been shelved since. Yesterday, the bank reapplied for eight branch licenses, the maximum under the new Central Bank guidelines. After all eight have been opened -- one of them in Mr. Casuela’s favorite place, Surigao -- the bank intends to apply for another eight and so on. The bank will also open a branch in the United States next year. The decisions to open a US branch was made during the stewardship of Mr. Casuela’s predecessor, Tarlac Representative Jesli Lapus. There has been no decision yet on where in the US the branch will be located.

•    Mr. Casuela has told Landbank personnel to work closely with local government units. “I want them to know the development plan of the town, the city, the province they are based in. I want them to work closely with the LGUs,” he said.

•    Mr. Casuela also wants the bank to look into its classification of loans. He believes that many loans categorized as corporate loans qualify as agricultural loans.@