UnionBank sets aside P3B for 2017 capex

Aboitiz-led Union Bank of the Philippines plans to fork out P3 billion this year, its highest capital expenditure budget in a single year, mostly to fund the bank’s digital transformation and shift to recurring earnings stream.

The P3-billion capital expenditure this year is triple the usual P1 billion that the bank had spent yearly in the past, UnionBank president Edwin Bautista said in an interview.

Of the total capital outlay budgeted for this year, Bautista said P2.9 billion would be for information technology (IT) spending.

“This is to change the whole architecture. We retained most of the core system but linking all of them requires a major effort to be seamless, so that wherever you go, we can track customers—like call centers (agents), we can track you when you go to the ATM,” Bautista said.

“It’s important to be seamless. We want to do it now while we can easily afford it,” he said.

Last year, Union Bank’s net profit surged by 67 percent to P10.1 billion on the back of higher interest earnings, fee-based income and profit from the sale of securities. This translated to a return on equity of 16.9 percent last year, improving from 10.9 percent in 2015 and the highest among banking peers.

This year, he said Union Bank would aim to grow its loan book by at least 30 percent, following a 31-percent expansion last year to P235.4 billion.

The bank expects a “zero trading gain” this year, Bautista said, adding that income this year would all come from recurring earnings such as net interest income and fees.

Union Bank’s entry into the bancassurance business—or the sale of insurance firms in its branches—is seen making a big impact this year, Bautista said.  The bank recently signed a deal to team up with homegrown insurance giant Insular Life for this business.

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