Union Bank of the Philippines (UnionBank), the banking unit of the Aboitiz Group, is planning to raise P10 billion from a stock rights offering even as it reported a 28 percent drop in net income last year.
In a disclosure to the Philippine Stock Exchange (PSE), the bank said its Board of Directors has approved the capital raising of up to P10 billion from all existing stockholders.
Net proceeds will be used to fund the capital infusion to UnionDigital, projected retail loan availments and for general corporate purposes.
Meanwhile, UnionBank reported a drop in net income to P9.2 billion last year from P12.7 billion in 2022 as bottom line was affected by integration costs related to the Citi consumer business acquisition.
Topline revenues posted robust growth of 36 percent to P71 billion last year from P52.2 billion in 2022, driven by a strong consumer business, higher margins, and customer transaction fees.
“We have surpassed our customer growth targets. Our customer base is now close to 14 million. The strategic shift towards a more predictable, recurring income model has proven successful, reflected in our above-industry net interest margins and fees as a proportion of our balance sheet size,” said UnionBank Chief Financial Officer Manuel R. Lozano.
He added that, “our overall profitability, however, was affected by front-loaded costs incurred in the integration of new businesses. In a way, we are temporarily carrying the cost of running on two systems – we are paying Citi a fee to support the business on their platform while we develop and fully transition all ex-Citi retail customers to our own system. These investments are necessary to ensure the sustainability of our consumer business growth moving forward.”
The bank’s net interest margin went up to 5.5 percent from 4.8 in the prior year. This resulted in net interest income rising 34 percent to P52 billion. The higher margin is attributable to the remarkable growth in consumer lending.
The bank’s consumer loans now account for 58 percent of total loan portfolio, which is diversified across credit cards, mortgage loans, personal/salary loans, and vehicle loans.
Non-interest income was up by 41 percent to P19 billion, with fee-based income higher by 54 percent to P10 billion. The growth in fees was a result of the growing customer transactions such as bills payments, funds transfers, interchange, and other card-related fees.
Operating expenses were up by 43 percent to P45 billion on account of the full-year impact of the acquired Citi consumer business and UnionDigital. These new businesses were only included as part of the banking group in the second half of 2022.
At the same time, the bank incurred one-time costs due to the integration of the acquired Citi consumer business.
“Investments in our new businesses are yielding highly promising results. The acquired Citi consumer business has consistently surpassed expectations, while UnionDigital attained profitability throughout its first full year of operations,” said UnionBank President and CEO Edwin R. Bautista.
He noted that, “we are experiencing early returns on these strategic investments, with leading indicators pointing towards a sustained increase in transactions over time. This is evidenced by a growing individual depositor base, an uptick in new-to-bank credit cards, record-breaking downloads of our mobile app, and net promoter scores that surpass industry standards.”
“Our commitment extends to completing the seamless integration of these new businesses this year. Immediately after, you will see a stronger and more profitable UnionBank,” added Bautista.