SEEDING the Maharlika Investment Corp. (MIC) came at the expense of capital from two state-run banks that could otherwise have generated higher dividends for the government, boosted bank earnings and expanded their lending capacity, according to an analysis by Geronimo Law.
Russell Stanley Q. Geronimo, founder of the financial consulting firm, said through an article that the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP) could have contributed a combined P17.84 billion in dividends to the National Treasury in 2022 had they not provided capital to the sovereign investment vehicle.
The banks were reprieved from their mandated dividend contributions to the government to protect their capital positions and comply with capital adequacy rules after their combined P75-billion capital contribution to the MIC.
Under Republic Act 7656, government-owned banks must remit at least 50 percent of their net earnings to the National Treasury as dividends.
LandBank earned P30.06 billion in 2022, which would have resulted in a P15.03-billion dividend under the 50 percent rule. DBP earned P5.61 billion, implying a dividend of P2.81 billion.
Had the banks retained the P75 billion and invested in Treasury bills (T-bills), Geronimo estimated it would have earned about P4.5 billion in 2024 and P3.75 billion in 2025, as key policy rates were high at that time and the 364-day yield was roughly 5 to 6 percent.
The MIC, however, earned only P2.68 billion in 2024 and P2.36 billion in 2025 from the funds. Geronimo said this was about P1.82 billion less than what the P75 billion could have earned in T-bills in 2024 and P1.39 billion less in 2025, for a total gap of about P3.2 billion over the two years.
‘Maharlika kept most of its money in bank deposits, so it took on almost no investment risk,’ he said. ‘If a fund taking no real risk earns less than [T-bills], the government would have done better simply holding its own securities, or borrowing less, since it was issuing [T-bills] at those same rates during the period.’
The P75 billion capital could have likewise generated about P9.5 billion in annual net income for the two banks, Geronimo said.
MIC, meanwhile, generated an average of about P2.5 billion a year during 2024 and 2025, implying an opportunity cost of P7 billion a year, or P14 billion over two years, he noted.
Furthermore, the banks’ capital infusion to MIC reduced their Common Equity Tier 1 (CET1) and shrank the maximum volume of loans they can extend.
Geronimo said the P75-billion reduction in the banks’ capital translated into P470 billion and P535 billion less in potential risk-weighted-asset capacity, based on the capital ratios at which the two banks operate.
The amounts are estimates of how much additional risk-weighted assets the banks could potentially have supported if they had retained the capital.
‘Bank rules limit how much a bank can lend based on how much capital it holds. Because the Maharlika investment is deducted from the banks’ capital under [Bangko Sentral ng Pilipinas] rules, it lowers the maximum amount the banks can lend,’ Geronimo said.
MIC was established in 2023 to mobilize and manage the Maharlika Investment Fund, the sovereign wealth fund of the Philippines.
The fund’s cumulative deployed capital reached P24.7 billion as of end-June, channeled into infrastructure, energy and logistics, among others.
Deployed investments generated P2.09 billion in total portfolio returns from January to June this year through dividends, loan interest, realized gains and equity holdings.