UNION BANK OF THE Philippines, Inc. (UnionBank) posted lower net earnings in 2018 amid margin pressures due to higher interest rates.
In a regulatory filing Monday, the Aboitiz-led UnionBank booked a P7.3-billion net profit last year, down 13% from the P8.4-billion income logged in 2017.
UnionBank saw its net income decline in 2018 even as its consumer loans rose 16% to P326.1 billion in the comparable year-ago period. This accounted for 33% of the lender’s total lending portfolio.
The bank added that all of its customer businesses except its thrift banking subsidiary CitySavings Bank posted “double-digit” growth in terms of volume.
Total income taken to retained earnings, on the other hand, stood at P8.5 billion, inclusive of adjustments due to the Philippine Financial Reporting Standards 9, or new accounting standards adopted in 2018.
Overall, UnionBank’s total assets were at P674.2 billion as of end-December 2018, 8.4% higher than the P622.1 billion in 2017.
“The strong performance of key business segments provided the cushion to the margin compression arising from interest rates,” UnionBank Treasurer and Chief Financial Officer Jose Emmanuel U. Hilado was quoted as saying in the disclosure.
The Bangko Sentral ng Pilipinas last year raised its borrowing costs by a cumulative 175 basis points through five consecutive rate hikes to rein in inflation, which reached nine-year highs.
Looking ahead, Mr. Hilado said the bank expects margins to improve in 2019 as assets reprice.
“We also expect CitySavings’ performance to improve this year, particularly due to its continued access to DepEd’s (Department of Education) automatic payroll deduction system.”
In early 2018, the DepEd suspended its automatic payroll deduction system for loans and insurance payments until June as it worked on new guidelines, making CitySavings as well as other thrift banks unable to issue loans for public school teachers.
Edwin R. Bautista, UnionBank president and chief executive officer, said the lender will focus on the third phase of its digital transformation journey this year by upscaling the critical digital customer touch-points, such as enhancing its mobile application features, launching a business banking platform, as well as rolling out more automated branches.
The bank is set to open more fully digital branches dubbed as “The ARK” in the coming months in Taguig City, Cebu and Davao, following the launch of its first digital branch in Makati City late 2017.
UnionBank shares closed at P64.45 apiece on Monday, down five centavos or 0.08%. — K.A.N. Vidal

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