April 26, 2015

Union Bank of the Philippines nets P1.5b in 1Q15

In a disclosure to the Exchange, Union Bank of the Philippines (UBP) said that it netted P1.5b in 1Q15, down 71% YoY. The drop was mainly attributed to the decline in the bank’s trading income. Net interest income also slid 5% to P2.5b as interest income from trading and investment securities went down as a result of the downsizing in the bank’s investment portfolio.

Non-interest income was down 30% YoY to P1.8b as the bank booked lower trading and miscellaneous income. Operating expenses were flattish YoY at P2.3b, while income taxes grew 10% YoY to P444m. While loans grew 5% YoY to P149b, assets declined by 10% YoY to P368b, mainly on account of the bank’s smaller investment portfolio.

Our take: UBP’s 1Q15 net income accounts for just 18.8% of the full-year consensus forecast. It also reflects a shift in the bank’s earnings mix which is seen to be increasingly dependent on interest earnings from loans and investments.

In the past years, the bank boosted its earnings through relatively high trading income. Also notable was the increase in the bank’s income taxes, which likely resulted from the shift in the bank’s earnings mix from trading income to core earnings. In previous briefings, the bank has said that it will focus its efforts on expanding its loan portfolio.

The bank has also said that its consumer portfolio now accounts for ~50% of total loan portfolio, with salary (DepEd) loans as its flagship product. – WealthSec