Union Bank of the Philippines net income surges by 42% in H1

MANILA, Philippines—Aboitiz-led Union Bank of the Philippines grew its first-semester net profit by 42 percent to P4.07 billion year on year as higher earnings from lending were complemented by trading gains.

In an interview, Union Bank president Victor Valdepeñas said the first-semester results translated to a return on equity of about 18 percent, boosted by the increase in both interest and noninterest income.

The bank’s net interest income in the first semester went up by 8.2 percent to P3.67 billion while net trading gains surged by 51 percent to P3.29 billion, based on a regulatory filing.

About 70 percent of the bank’s first-semester bottom line was chalked up during the first quarter while the second quarter contributed 30 percent.

For the second quarter alone, Union Bank’s net profit declined by 43 percent to P1.22 billion year on year as trading gains fell (by 32 percent to P641.3 million) even as net interest income surged (by 16.3 percent to P1.89 billion). This was in line with market expectations of slower treasury gains in the second quarter.

“The second quarter was when emerging market (asset) prices, including bond prices went down significantly. But we did anticipate this and that’s why we took profits in the first quarter,” Valdepeñas said.

Union Bank expanded its loan book by 14 percent year on year in the first semester to end-June with net loans and receivables of P87.5 billion, boosted by the robust expansion in consumer and middle-market lending.

Valdepeñas noted that consumer lending had risen on the back of over 30 percent expansion in auto and mortgage lending while the middle-market segment likewise expanded by close to 30 percent.

“But our corporate (lending book) has been flattish. There’s a shift (in corporates’ funding preference) from promissory notes to preferred shares. They are moving in that direction, taking advantage of the low-cost environment to issue long-term liabilities and therefore from that standpoint, there’s a shift from loan book to private securities,” Valdepeñas said.

Apart from growing its loan book, Union Bank also expanded other earning assets, growing by 43 percent year on year its available-for-sale trading and investment securities to P89.68 billion as of end-June.