AUB ready to restructure borrowers’ loans amid ‘uncertain times’

Asia United Bank Corp. (AUB)

Asia United Bank Corp. (AUB) sees a better loan portfolio this year with the resurgence of economic activities, but noted that rising inflation might dent borrowers’ ability to repay their obligations.

“With the improved economic environment, we expect loan quality to be much better in 2022 for the banking industry in general,” AUB president Manuel Gomez said during a stockholders’ meeting on Friday.

Nevertheless, Gomez said the listed bank would continue to assist pandemic-hit borrowers by restructuring their loans.

“We have been successful with our efforts of restructuring and adjusting the new terms to borrowers who might still need flexible terms as they navigate through these uncertain times,” he said.

AUB chair Abraham Co also noted they have “cleaned up” the bank’s balance sheet in the past two years.

As of end-March, the bank’s nonperforming loan (NPL) ratio was reduced to 1.88 percent from 2.4 percent in the same period last year.

NPLs are loans that have been unpaid for at least 90 days. NPL ratio is the share of NPLs to the total loan portfolio.

“Now, these headwinds that are coming in from high inflation, from high political risk, from fiscal and monetary issues that are being addressed by the new government will negatively affect asset quality,” Co explained.

“It will hurt our income statement in terms of credit losses especially due to inflation or high interest rate,” he added.

Inflation in May grew to 5.4 percent from 4.1 percent the previous month due to higher food and transport costs. On Thursday, the Bangko Sentral ng Pilipinas raised the key policy interest rate by another 25 basis points to 2.5 percent.

In the first quarter, AUB saw its net income surge by 79 percent to P1.32 billion from the previous year’s P736.02 million as operating income climbed by 16 percent to P3.35 billion. Interest income was flat at P3.15 billion.

—Tyrone Jasper C. Piad, INQ