Union Bank redeems P1.3-B bonds, grows Q2 net profit to P2.15B

MANILA, Philippines—Aboitiz-led Union Bank of the Philippines is set to redeem by September this year P1.29 billion worth of debt notes qualifying as tier2 or supplementary capital.

Union Bank also recently disclosed that it had grown its second quarter net profit by 57.7 percent to P2.15 billion from a year ago on the back of robust consumer lending and trading gains.  This brought net profits for the January to June period to P2.86 billion, up by 28.8 percent from the same period last year.

In a separate disclosure on Monday, Union Bank said its board of directors had approved the exercise of the bank’s call option on the 10-year tier 2 notes issued in 2006.

The bank had the option to redeem these notes, which had a coupon rate of 9.5 percent, on the fifth year or by Sept. 26 this year.

In the first semester of the year, the bank had also put up more buffer for potential loan losses in anticipation of a volatile second semester. Impairment provisions for the first half were expanded to P473.76 million, more than double the P211.67 million buffer set aside a year ago.

“The next six months could be volatile because we don’t know what will happen to the Eurozone,” Union Bank president Victor Valdepenas said in an interview. “Again, we try to manage it by trying to expand the (loan) book and booking more consumer finance,” he said.

For the first half, Union Bank’s loans and other receivables grew by 2.8 percent to P76.83 billion from a year ago, about a third of which consisted of consumer loans. “The main contributor would be the auto, mortgage and credit card businesses which are experiencing growth rates of something over 30 percent,” Valdepenas said.

Net interest income for the first six months amounted to P3.39 billion, 4.1 percent lower than a year ago as net interest margins narrowed.

“Margins continue to go down because the yields continue to go down significantly,” Valdepenas said, thus noting that the thrust would be to grow the consumer finance business where margins were higher compared to commercial and corporate loans.

On the other hand, Union Bank’s “other” income in the first semester surged to P4.49 billion from P2.16 billion a year ago as trading gains expanded to P2.18 billion from P747 million over the period.

Valdepenas explained that the bank had realized some trading gains from its investment accounts.

For the second quarter alone, trading gains soared to P1.99 billion from P533 million a year ago.

On the other hand, net interest income declined by around 10 percent to P1.63 billion.

On the expenditure side, second quarter spending rose to P2.29 billion from P1.5 billion a year ago largely due to higher salaries and employee benefits, taxes and licenses and trust fund contribution.

Union Bank ended June with total resources of P235.8 billion, of which P180.67 billion was funded by deposits.  Equity attributable to shareholders amounted to P37.3 billion.