REBISCO group-led ASIA United Bank seeks to become a more significant player in the banking system by doubling its branch network while maintaining its long-term profitability at around 10-15 percent return on equity.
In a press chat after AUB’s annual stockholders meeting on Friday, bank president Abraham Co said with the Philippine economy likely to grow by at least 6 percent this year, the outlook was likewise positive for banks.
“It will be good. We feel optimistic,” Co said, noting that compared to previous years, AUB had built a more stable earnings base. At present, 80 percent of the bank’s earnings base is derived from lending while only 20 percent is from the treasury business- a reversal of the mix years ago which used to be as much as 70 percent reliant on the volatile treasury business.
Co said the 27-percent year-on-year growth chalked up by AUB in the first quarter would be a good indication of what to expect for the rest of the year.
In terms of growth aspirations, Co said AUB would still need to grow by doubling its branch network. “But we have to pace it in relation to our profitability,” he said.
Currently, AUB has 222 branches and employs around 1,800 people.
Co estimated that it would now usually take about three years to turn a new branch profitable while in the past it would take only six months, suggesting stiffer competition and a tougher regulatory environment for the industry.
Asked whether AUB could grow to be among the top five banks in the country in terms of asset size, Co said this would be possible through mergers and acquisitions (M&As).
“If that were to happen, we have to buy another bank or merge with another bank. Growing by ourselves is not possible,” Co said.
AUB has had previous M&A experience with its acquisition of three banks: Asiatrust Development Bank; The Rural Bank of Angeles and Cooperative Bank of Cavite.
The bank ended last year with P151.36 billion in assets, making it the 15th largest among the country’s 40 universal and commercial banks as of end-2015.
This year, AUB sees challenges from continuing market volatility, entry of new foreign banks with the liberalization of the industry, high liquidity that keeps asset yields low, additional capital adequacy ratio and other regulatory requirements as well as high information technology (IT) security threats.
With the Bangladesh bank cyber-hacking and the laundering of stolen money into the Philippines, AUB has turned more cautious over IT security and potential fraud. Co said banks now had to hire more white hat hackers or computer security specialists who break into systems and networks to test and asses their security, using their skills to improve security by uncovering vulnerabilities before malicious hackers can exploit them.
In terms of net interest margin (NIM), Co sees it a tall order to maintain the 4.3 percent level seen by the bank last year. However, he said AUB could maintain NIMs above the industry average of close to 3 percent.
On Friday, AUB’s approved a declaration of 20 percent cash dividends equivalent to P0.67 per share or a total amount of P325.16 million. The record date of the cash dividend will be 10 trading days after receipt by the bank of the notice of approval by the Bangko Sentral ng Pilipinas while the payment date will be 18 trading days after the record date.