China's largest bank eyes GSIS-owned bank

Industrial and Commercial Bank of China Ltd. (ICBC), China’s largest commercial bank, has expressed interest in investing in GSIS Family Bank (GFB), a wholly-owned subsidiary of the Government Service Insurance System (GSIS).

GSIS president and general manager Winston Garcia bared ICBC’s plan, saying the move would enable GSIS Family Bank to operate as a commercial bank.

As a strategic partner, ICBC will make a substantial capital infusion to the GFB to enable the latter to operate as a commercial bank to significantly boost its present operations but the pension fund manager said the terms of investment have yet to be finalized.

“The investment of ICBC will not only provide the GFB with a very strong financial base, but also signify ICBC’s confidence in the Philippine banking and financial system, as well as the whole economy,” Garcia said.

GSIS expects the partnership to be finalized within the year as the two parties are now securing the necessary approvals from the respective banking authorities.

The formal offer was made after recent discussions between ranking officials of the GFB and ICBC here in Manila and in Beijing, China.

In a letter to GFB president and GSIS trustee Reynaldo Palmiery, ICBC deputy general manager Wang Wenbin indicated their interest to invest in the GFB.

ICBC has also sought a confirmation from the Bangko Sentral ng Pilipinas the granting of incentives for the entry of a third party strategic investor in GFB.

Specifically, the foreign bank sought the grant of a commercial license with authorities to operate and engage in expanded foreign currency deposit units, trust and quasi-banking functions provided it can meet the required minimum capital for a commercial bank

ICBC also plans to open an additional 20 branches of the GFB and relocate 12 of its existing 22 branches anywhere in the Philippines, including restricted areas, as well as continue the GFB’s authority to accept government deposits from the GSIS and local government units.

“We also require confirmation from the GSIS that GFB will continue to be the conduit for its investments and that the GSIS is prepared to divest to a minority position in GFB,” Wang said in his letter.

Last May, officials of ICBC visited the country to scout for possible investment opportunities.

ICBC is the largest bank in China and in the world in terms of market value and one of the world’s top 10 banks in terms of assets.

As of 2006, it had assets of $893 billion, with over 18,000 outlets including 106 overseas branches and agents globally. In July 2007, with a market capitalization of $254 billion, it became the world’s most valuable bank after a strong gain in its share price.

ICBC was founded in 1984. Since its foundation in 1984, the bank has fully undertaken industrial and commercial credits and savings businesses which were originally transacted by the People’s Bank of China.