Union Bank bags GSIS funds

The Government Service Insurance System (GSIS) has pulled out its deposits from the Land Bank of the Philippines (Landbank) and picked the Aboitiz-owned Union Bank of the Philippines (UBP) as official depository.

GSIS president and general manager Winston Garcia said the GSIS had begun pulling out its account from Landbank because the bank had demanded a P7- to P8-billion maintaining balance.

According to Garcia, the GSIS had usually maintained around P7 billion in its Landbank account but the bank had never before imposed a maintaining balance until the account went below the P7-billion mark.

Garcia said the GSIS at certain points had deposits of up to P16 billion in Landbank until management informed the government fund that the balance should not go below P7 billion.

"Then they wrote us that we needed to maintain a balance of P7 to P8 billion or terminate the account within 60 days," Garcia said.

According to Garcia, GSIS would not be able to maintain this level of deposits so it decided to move its deposits from Landbank, a government financial institution, to UBP, the private bank owned by the Cebu-based Aboitiz Group.

Garcia said the GSIS selected UBP from a group of several other banks including the Development Bank of the Philippines (DBP), another GFI which required GSIS to maintain a balance of P2.5 billion.

Garcia said the Philippine National Bank (PNB) also offered its services but its maintaining balance requirement was even bigger at P3 billion. He said UBP offered the lowest maintaining balance requirement of P1 billion along with its electronic banking services.

Bagging the GSIS deposits would be a major boost to UBP which is currently in the market for $150 million worth of bonds being offered this week.

The medium-sized commercial bank said the demand for the three-year paper was "strong," attributable to robust demand for Asian credit.

The UBP has appointed Credit Suisse First Boston Corp. and UBS AG as lead managers.

Reports earlier said demand for the offering had been slow, with the order book only around $90 million over the weekend as investor attention was distracted by a flurry of high-yield deals from other regions.

International credit ratings agency Moody’s Investors Service has assigned a Ba2 rating to the senior unsecured debt due 2009.