UNIONBANK OF THE Philippines, Inc. is optimistic its thrift banking arm will recover this year amid better market conditions as well as acquisition of Philippine Resources Savings Bank Corp.
In a media briefing on Friday, UnionBank President and Chief Executive Officer Edwin R. Bautista said the Aboitiz-led lender is positive City Savings Bank, Inc. (CitySavings) will contribute more to the income of its parent lender due to better lending conditions.
“They were like 30% of our income, they moved down to 15%. If they can move back up to 20-25%, I’ll be very happy,” Mr. Bautista told reporters following UnionBank’s annual stockholders’ meeting in Pasig City.
In early 2018, the Department of Education (DepEd) suspended its automatic payroll deduction system for loans and insurance payments until June last year as it worked on new guidelines, making CitySavings as well as other thrift banks unable to issue loans for public school teachers.
Now that the thrift bank can lend to teachers again, Mr. Bautista said CitySavings will be able to push its loan volume anew.
“They (CitySavings) need to get their old volumes back up to pre-moratorium days. So far, last month, we’re already there,” he said.
“They also need to reduce their funding costs, and the good news is interest rates are going down. Plus the reserve requirement ratio (RRR) cut will also help.”
Earlier this month, the Bangko Sentral ng Pilipinas (BSP) cut benchmark interest rates by 25 basis points to a 4-5% range on the back of “manageable” inflation outlook, as food prices declined and supply conditions improved.
The central bank also announced last week that it will reduce the RRR of thrift banks thrice until it becomes 6% in July from the current 8%. This comes a week after the BSP’s Monetary Board announced a similar cut in big banks’ RRR to 16% from the current 18%. The first stage of the phased implementation of the reductions will be effective on May 31.
“As interest rates move down and the RRR move down…your margins will go back to where they were,” Mr. Bautista said.
Apart from teachers’ loans, the bank president added that motorcycle lending will also drive the growth of CitySavings after it absorbed PR Savings Bank.
CitySavings completed the acquisition of PR Savings Bank in March, allowing the Aboitiz-led lender to venture into motorcycle loans.
“Definitely the growth increase will be faster on the motorcycle than on DepEd’s. Kasi (Because) with DepEd, we’re the market leader already…pero sa (but in) motorcycles, bago eh (we’re new),” Mr. Bautista said.
UnionBank posted a P2.16-billion net income in the first three months of the year, down 26% from P2.93 billion recorded in the same quarter in 2018.
Shares of UnionBank closed at P59.60 apiece on Friday, up 20 centavos or 0.34%. — Karl Angelo N. Vidal