Unionbank Q3 profit up 59%

Aboitiz-led Union Bank of the Philippines grew its third-quarter net profit by 59 percent year-on-year to P1.83 billion as improved trading gains complemented the double-digit rise in core earnings for the period.

This quarterly performance brought the nine-month profit to P5 billion, 31.8-percent lower than the previous year’s level in the absence of big trading gains that boosted comparative earnings in early 2013, according to a regulatory filing.

The nine-month earnings translated to an annualized return on equity of nearly 15 percent and put the bank on track with full-year earnings guidance of P7 billion, Union Bank president Victor Valdepeñas said in an interview Friday night.

City Savings, which was consolidated into the bank last year, contributed P1.28 billion to Union Bank’s nine-month profit. The thrift bank thus helped its parent bank temper the sharp year-on-year decline in trading gains seen earlier this year.

What was striking in the third quarter, Valdepeñas said, was the impact of higher interest differential on the financial intermediation business alongside the higher volume of consumer lending.

Overall loan book grew by a modest 2.3 percent year-on-year to P123.48 billion but by beefing up the higher-margin consumer loans, the bank was able to unlock higher interest earnings.

For the third quarter alone, net interest income went up by 17 percent to P2.73 billion. This jacked up total net interest earnings for the nine-month period by 25 percent to P7.97 billion.

“Consumer business contributed the most. Consumer business is moving up significantly, particularly teachers’ loan. The credit card started to grow quite nicely,” Valdepeñas said.

Fee-based earnings likewise rose by 8.6 percent year-on-year to P853.47 million in the third quarter. For the nine-month period, earnings from this segment were up 38 percent year-on-year to P2.47 billion.

The bank’s net trading gains in the third quarter surged by 2.5 times the level in the same quarter last year to P694.75 million. Due to sluggish trading gains early in the year, however, cumulative net trading gains for the nine-month period were still down 71.5 percent year-on-year to P1.68 billion.