UNIONBANK of the Philippines (UnionBank) said its car loan growth will pick up by the end of the year after the government implemented the first tranche of its tax reform plan in January.
In an interview, UnionBank President and Chief Executive Officer Edwin R. Bautista said he sees the lender’s car loans to pick up by the end of the year as people will likely save more money due to the additional take-home pay brought by the tax reform.
“I think it will correct. So probably, after six months. It will pick up later this year,” Mr. Bautista told BusinessWorld in an interview yesterday.
Early this year, the government implemented the Tax Reform For Acceleration and Inclusion Law (TRAIN). This introduced additional taxes on certain commodities such as cars and petroleum, which came at a time of three-year highs for world crude prices.
The new law also provided tax cuts and exemptions on personal income, exempting workers who earn less than P250,000 annually from paying income tax.
“It will happen when those people with additional take-home pay [will be capable to save money for the down payment],” Mr. Bautista added.
Mr. Bautista said UnionBank’s car loans were steady following the implementation of TRAIN, in line with the industry’s performance.
“Well obviously, it’s only flat. The industry already announced that they also saw flat growth. For an industry growing 20%, to flat, that’s a big reduction,” Mr. Bautista said.
According to the Chamber of Automotive Manufacturers of the Philippines, Inc. and Truck Manufacturers Association, automotive sales grew at a slower pace in January, the month TRAIN took effect.
Automobile sales, covering passenger cars and commercial vehicles, increased by just four percent to 31,645 units from 30,425 in January 2017. This is also lower than the 45,494 units sold the previous month.
Prior to the tax reform law, Mr. Bautista said the Aboitiz-led lender saw a 20% pickup in the third quarter.
“Yes, they bought cars ahead. We saw about 20% more. We saw the highest spike in the third quarter when car buyers are already sure that the price will rise,” Mr. Bautista said in Filipino, adding that some car companies brought in their new models before the reform was enacted.
UnionBank said in a previous disclosure to the Philippine Stock Exchange that its loan portfolio is well-diversified, with consumer loans accounting for more than one-third of its total lending business.
According to the latest data from the Bangko Sentral ng Pilipinas, UnionBank was the tenth largest bank in the country in terms of total loans as of end-September 2017.
The bank booked a lower net income in 2017 despite positive recurring income across all its business segments. It earned P8.4 billion last year, down by 16.9% from the P10.1 billion in 2016.
UnionBank shares closed at P91.50 each yesterday, down 50 centavos or 0.54% from Tuesday’s finish. — K.A.N. Vidal