High-yielding consumer loans lift UBP’s income

HIGH-yielding consumer loans propped up the net income of Union Bank of the Philippines (PSE: UBP) by 6 percent in the first six months of the year.

In a disclosure to the Philippine Stock Exchange, UBP said these consumer loans offset the impact of rising costs allowing it to book a net income of P6.4 billion in the first half of 2023.

“This kind of momentum gives me confidence that [we] will achieve its goal of becoming the largest and most profitable retail bank in the Philippines by 2025,” Bautista said.

UBP reported its net revenues for the first half of the year amounted to P34.4 billion, increasing by 60 percent versus the same period last year.

shares held as treasury shares of RCBC and the issuance to SMBC of 168.62 new common shares, both at the price of P71 apiece. SMBC now owns 20 percent of the Yuchengco-led lender.

RCBC said SMBC’s capital infusion is part of the bank’s capital raising plan to support long-term sustainable asset growth and investments in technology and cyber security and human resources.

Established in 1960, RCBC has a P1.17-trillion balance sheet and a loan portfolio of P588 billion as of end June.

As the first local bank to establish a Japan Desk back in 1974, RCBC’s dealings with Japanese companies are some of the most extensive among its peers.

“Closer collaboration will open more business matching opportunities for RCBC’s local customer base and SMBC’s global network,” the lender said.

“Through this, RCBC and SMBC shall jointly establish a bridge for Philippine businesses and consumers to connect to international markets and vice-versa,” it said.

By Cai U. Ordinario @caiordinario

THE continued recovery of the Philippine economy and broad-based growth across its core businesses helped earnings reach P35.2 billion for the first half the year, a statement issued last Monday by BDO Unibank Inc. (BDO) read.

Given these, BDO said in a disclosure to the Philippine Stock Exchange (PSE) that its return on common equity increased to 15.1 percent compared to 11.3 percent in the same period last year.

“With improving macro-economic trends exemplified by decelerating inflation, sustained GDP [gross domestic product] growth and stable foreign exchange and interest rates, the bank remains poised to capitalize on emerging growth opportunities given its solid balance sheet, strong business franchise and diversified earnings streams,” BDO said.

The bank reported that its net interest income rose to P89.5 billion as gross customer loans expanded 8 percent yearon-year to P2.7 trillion while deposit liabilities broadened 12 percent to P3.3 trillion. BDO also said its non-interest income grew 11 percent to P38.2 billion due to the strong growth in various fee-based and Treasury/FX businesses. It noted that pre-provision operating profit settled at P52.4 billion, with revenues continuing to grow faster than operating expenses.

The lender said its non-performing loan ratio dipped quarter-on-quarter to 1.95 percent from 1.98 percent, while NPL coverage improved to 174 percent with prudent credit and provisioning policies.

Shareholders’ equity increased to P487.5 billion given profitable operations. Capital adequacy ratio and Common Equity Tier-1 ratio strengthened to 15 percent and 13.9 percent, respectively. According to BDO, these remain comfortably above regulatory minimum levels. Book value per share increased 13 percent to P91.42.

“Our costs will temporarily be elevated this year while the integration of the acquired Citi consumer business is ongoing. Having said this, we have a healthy earning asset base. We have a well-diversified consumer loan mix and all segments are growing in double digits,” UBP Executive Vice President and Chief Financial Officer Manuel R. Lozano said.

“As soon as we complete the Citi integration, we expect a substantial reduction in operating expenses that will bring us back to aboveindustry ROE (Return on Equity) we have been known to deliver,” he added.

UBP President and CEO Edwin R. Bautista said their consumer business is being driven by its 12 million customers. The bank also benefited from the business from Citi, which contributed one-third of its income during the period.

Bautista added that UBP’s thrift bank subsidiary City Savings Bank Inc. continues to be “a market leader in providing salary loans.”

He also noted its digital bank subsidiary “is already profitable and growing fast.”

Net Interest income grew 41 percent to P24 billion mainly due to a 43 percent increase in the bank’s loan portfolio plus better net interest margin. Net interest margin increased by 60 bps to 5.2 percent.

The bank’s proportion of consumer loans to total loans improved to 55 percent this year versus 42 percent last year.

Fees and other income more than doubled to P10.5 billion, primarily due to card-related transactions, digital transactions, and the growing base of the Bank’s key subsidiaries.

Operating expenses were up by 82 percent to P21.8 billion on account of one-time integration cost of the acquired Citi consumer business and the establishment of Union Digital Bank.

“Excluding the planned costs attributed to these new business segments, the increase in operating expenses was in line with volume growth,” UnionBank said.

Total assets as of June 2023 amounted to P1.1 trillion, up by 27 percent from June 2022. Net loans and receivables climbed up by 43 percent to P522.2 billion, while total deposits increased by 25 percent to P693.3 billion.

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