UnionBank sees net profit rise by 30% in first quarter

UNION BANK of the Philippines, Inc. (UnionBank) registered a 30% increase in its net profit in the first quarter amid gains from its acquisition of Citigroup, Inc.’s consumer business in the country.

The bank booked a net income of P3.4 billion in the first three months of 2023, it said in a disclosure to the local bourse on Tuesday.

Its quarterly report was not available as of press time.

“The investments we made last year have exceeded our expectations. UnionDigital is already profitable after less than a year in operation. There is strong momentum in the acquired credit cards business from Citi. New-to-bank card customers are at a record level,” UnionBank President and Chief Executive Officer Edwin R. Bautista was quoted as saying.

“We are geared up to grow our retail banking business. Our infrastructure is ready for scale. We have sufficient capital coming from the recent stock rights offering to further grow our earning asset base,” Mr. Bautista added.

UnionBank’s net revenues increased by 57% year on year to P16.1 billion, with bulk coming from recurring income.

Net interest income rose by 43% to P11.5 billion “propelled by the P3-billion contribution of the acquired Citi consumer business, as well as strong consumer loan growth in the parent bank, CitySavings, and UnionDigital,” UnionBank said.

UnionBank’s acquisition of Citi’s Philippine consumer banking business was completed in August 2022.

The transaction, valued at P55 billion, covers Citi’s credit card, unsecured lending, deposit and investment businesses, as well as Citicorp Financial Services and Insurance Brokerage Philippines, Inc., which provides insurance and investment products and services to its retail clients.

On the other hand, City Savings Bank, Inc. is UnionBank’s thrift bank subsidiary, while UnionDigital Bank is the listed lender’s online bank.

UnionDigital was granted a digital banking license by the Bangko Sentral ng Pilipinas in July 2021. It began operating in July 2022.

UnionBank in February completed a P12-billion stock rights offering, with proceeds set to fund UnionDigital’s capitalization and loan availments.

The bank said its net interest margin stood at 5.21% as of end-March, 54 basis points higher than the year-ago level, despite the rising cost of funds.

Earning assets grew by 28% year on year to P849.9 million in the first quarter.

Meanwhile, fees and other income, excluding earnings from trading, jumped by 82% to P4.2 billion on the back of fees from increased digital and card-related transactions.

“Our retail focus has allowed us to preserve our margins against a backdrop of continued policy rate hikes. We expect our core income to further improve throughout the year as we grow our consumer portfolio,” UnionBank Executive Vice-President and Chief Financial Officer Manuel R. Lozano said.

“Our expenses this year are still elevated due to one-offs, as we are effectively running on two systems to integrate the acquired Citi consumer business into ours. Once we complete the migration this year, we are confident that we will once again generate double-digit return on equity,” Mr. Lozano added.

Net loans and receivables climbed by 39% to P490 billion.

On the funding side, total deposits grew by 20% to P692.9 billion on the back of “healthy” growth in the bank’s cash management and retail banking segments.

UnionBank’s total assets grew by 30% to P1.1 trillion at end-March.

Its shares closed unchanged at P84.85 apiece on Tuesday. — AMCS