Union Bank bullish on H2 prospects
Aboitiz-led Union Bank of the Philippines expects business to pick up pace in the second semester, allowing the bank to end the year with a double-digit growth in net profit, with the resumption of its thrift bank arm’s lucrative lending program for teachers.
Union Bank grew its first semester net profit by 8 percent year-on-year to P4.7 billion. Bank president Edwin Bautista is confident that full-year net profit growth would meet the bank’s double-digit growth goal.
“In the first half we were ahead of last year but if you remove trading gains—which wasn’t much—we would be 5 percent below last year,” Bautista said in an interview with Inquirer last week. “But there’s a big reason why—we couldn’t loan to teachers.”
Union Bank’s thrift bank arm City Savings Bank extends salary loans to teachers under an accreditation program of the Department of Education (DepEd). The thrift bank’s teachers’ salary loan program is sizable at P60 billion and contributes about P150 million in net income after tax, Bautista said.
In the last eight months, this lending program was suspended as DepEd fine-tuned its internal processes to prioritize a similar lending program by the state-owned Government Service Insurance System.
Now that the review of internal procedures had been completed, Bautista said starting July, the “numbers got back to normal.”
City Savings contributes P3 billion yearly to the bank’s net.
“This year, it will be below because of the teachers’ loan program,” he said.
He said Union Bank had not changed its target of growing net profit at a double-digit pace this year. In 2017, the bank chalked up a net profit of P8.4 billion.
Even with the suspension of the teachers’ loan program, the bank’s loan book had expanded by 17 percent so far this year. With the resumption of the program, growth is expected to be faster in the second half.
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