Union Bank 9-month profit up 16.2%
Union Bank of the Philippines grew its net profit in the first nine months by 16.2 percent year-on-year as the buildup in interest and fee-based earnings made up for the slack in third-quarter treasury gains.
Union Bank, a unit of the Aboitiz group, chalked up a net profit attributable to parent equity holders of P7.336 billion from January to September—higher than the P6.315 billion reported the previous year.
“As far as this year is concerned, we are well on track into achieving our target budget of growth of about 15 percent per annum,” Union Bank president Victor Valdepenas said in an interview.
For the third quarter alone, the bank’s net profit tumbled by 49 percent to P1.147 billion as treasury earnings thinned out compared to the hefty windfall seen in the first half of the year.
Net trading gains for the third quarter slid by 86 percent year-on-year to P273.33 million. But because of large trading gains earlier this year which benefited most banks, nine-month net trading gain still marked an 11.5-percent year-on-year increase to P5.89 billion.
“Treasury earnings slowed down in the third quarter because we made a lot in the first half. And with interest rates elevated during the third quarter, a lot of the capital gains that we experienced in the first half got eroded,” Valdepenas explained.
Meanwhile, Union Bank beefed up its core earnings from lending, thereby growing net interest income in the first nine months by 17.3 percent year-on-year to about P6.4 billion.
When the treasury engine faltered in the third quarter as financial markets turned turbulent, Union Bank fired up lending. As as a result, third quarter net interest income jumped by 30.8 percent year-on-year to P2.33 billion.
At the end of September, Union Bank expanded its loan book by 32.66 percent year-on-year to P120.64 billion.
Valdepenas attributed this robust lending expansion to increased funding due to strong deposit generation. He said the bank boosted all business segments—credit cards, retail banking and commercial banking.
“Retail banking, compared to last year, practically quadrupled earnings. The momentum for that will continue,” he said.
The bank likewise boosted its stream of recurring earnings from service charges, fees and commissions which generated P1.79 billion in nine-month income, jumping by 169 percent from the same period last year. For the third quarter alone, fee-based earnings nearly tripled to P786.16 million from P286.99 million a year ago.
As of end-September, Union Bank widened its balance sheet by 51.85 percent year-on-year to P345.94 billion as assets increased with the expansion in loan book, as well as trading and investment securities. This was partly funded by a 65.9-percent growth in deposit base to P258.49 billion.
“Our growth in deposits has been very strong, particularly low-cost CASA (current account-savings account) deposits in the last 18 months,” Valdepenas said. “The productivity of our branches have continued to improve significantly because of growth in deposits. And as far as the total bank is concerned, revenue to expense ratio continues to be at 2.7 times ratio. This means that for every P1 that we spend, we get almost P2.70 of revenue.”
