By Eileen A. Mencias

Government’s deposits with United Coconut Planters Bank have increased to P11 billion, sources said over the weekend.

UCPB sources said the bank received an additional P5 billion from the government, bringing state deposits in the bank to P11 billion. The government plans to transfer P30 billion in state deposits to UCPB as part of a rehabilitation package.

UCPB, the Finance Department, Philippine Deposit Insurance Corp. and the Bangko Sentral have signed a memorandum of agreement on the bank’s rehabilitation program. The program would have expired on Dec. 24 but the release of the funds on Dec. 18 kept the agreement in force.

UCPB’s rehabilitation program features central bank approval of a business plan, P30 billion in state deposits for income support, with the bank investing the money in government securities, and the conversion of a P12-billion PDIC loan into equity.

The release of the entire P30 billion, however, was tied to the capitalization of the Bangko Sentral to compensate for the withdrawal of government deposits from the central bank to UCPB.

PDIC, under the plan, will convert its remaining P12-billion loan to UCPB into equity and ease the strain on the bank’s finances once the bank receives the P30-billion assistance in full.

UCPB will use proceeds of the state deposits to invest in government securities to earn income.

UCPB executive vice president Cesar Rubio earlier said the bank stood to get more state deposits pending the next primary auction of government securities.

National Treasurer Roberto Tan said UCPB wanted to invest the P30-billion assistance in 10-year government bonds. But bond prices in the secondary market were too expensive for UCPB to earn money.

UCPB was once among the country’s largest bank until the government sequestered it and took control in the 1980s. With the ownership issue unsettled, the bank failed to hold a stockholders’ meeting to approve, among other things, an increase in capital.

UCPB has not embarked on any capital-raising activity since its sequestration, unlike other private banks.

UCPB reported a 12-percent growth in assets to P114.4 billion at the end of 2008 from P101.68 billion in 2007. Total loans expanded 48 percent to P32.5 billion. Consumer loans rose 42 percent to P4.7 billion, with commercial credits improving 56 percent to P22.4 billion.