Union Bank posts record profit

MANILA, Philippines—Aboitiz-led Union Bank of the Philippines quadrupled its first-quarter net profit to a record-high P2.84 billion from a year ago on the back of hefty increases in trading gains.

The three-month performance brought the bank’s return on equity to nearly 26 percent, as Union Bank earned as much profit as what was recently reported for the first quarter by the country’s largest bank, Banco de Oro Unibank.

The surge in first-quarter net income to P2.84 billion from only P708.28 million a year ago was fueled by the substantial growth in net trading gains to P2.65 billion from only P187 million a year ago.

“It was a very strong first quarter. It’s another record quarterly earnings and the reason behind that is Union Bank continues to take advantage of the volatility in the marketplace. We were able to pre-position last year as a result of the uncertainties in the European market and to that extent, the results in foreign exchange and securities trading were remarkable,” Union Bank president Victor Valdepenas said in an interview on Saturday.

“But what’s even more remarkable is that in the last several quarters starting last year, our consumer group’s auto and mortgages have been growing at double-digit levels,” he said.

In the first quarter, Union Bank grew its loan book by 19 percent to P115.17 billion.

Net interest income was steady at P1.77 billion from P1.76 billion a year ago.

Declining asset yields remained a challenge, Valdepenas said, which was why net interest earning was flat even if the lending volume had gone up.

“It’s still a borrower’s market. Borrowers are asking for unheard of rates that were never seen in the last 25 years,” Valdepenas said, adding that this was due to excess liquidity in the financial system.

“We will see that (interest earnings) improve, because we have established improved funding base that will pay off in the next few quarters,” he said.

Union Bank ended March with resources of P260 billion, of which P190.33 billion was funded by deposit liabilities. Capital funds stood at P44 billion.

Valdepenas said Union Bank had also put up more loan loss provisions in the first quarter, bringing its non-performing loan cover to more than 100 percent.

On the operating side, Valdepenas said the bank had consolidated its branches to rationalize costs.

On the consumer franchise, he said Union Bank had started to move into new business lines and had decentralized lending program to allow field managers the flexibility to offer on-the-spot credit facility within a certain limit.