Increased provision for bad loans pulled down UBP profit in H1

Aboitiz-led Union Bank of the Philippines saw a 6-percent year-on-year drop in first semester net profit amounting to P4.5 billion on enlarged buffer set aside for probable loan losses amid the tough environment caused by the coronavirus pandemic.

UnionBank increased provisions for loan losses to P7 billion in the first half versus its buffer of P364 million in the same period last year, the bank disclosed to the Philippine Stock Exchange on Monday.

“The bank deemed it prudent to add reserves ahead of the potential impact of the COVID-19 crisis on its credit portfolio,” UnionBank said.

The bank’s six-month performance translated to a return on equity of 9.2 percent compared to 11.1 percent last year.

Excluding loan loss provisioning, UnionBank’s core businesses expanded.

Revenues went up by 55 percent year-on-year to P22.1 billion in the first six months, driven by the sustained increase in net interest income, as well as higher trading gains for the year.

Net interest income grew by 41 percent year-on-year to P13.8 billion on higher earning assets and margin improvement.

Other income also went up by 86 percent to P8.3 billion, mainly attributed to trading gains.

UnionBank grew its loan book by 7 percent to P351 billion. Customer loan growth was driven by the expansion of consumer, small and medium enterprise and commercial segments, which surged by 33 percent, 22 percent and 33 percent, respectively.

Interest income also rose by 94 basis points to 4.5 percent, driven by lower funding costs resulting from the 21-percent year-on-year growth of lower-cost deposits, alongside the decline in interest rates.

As of end-June, UnionBank’s total assets increased by 7 percent year-on-year to P751.5 billion, while total deposits increased by 19 percent year-on-year to P510.4 billion. —Doris Dumlao-Abadilla INQ