Union Bank of the Philippines (UnionBank) is infusing an additional capital of up to P1.6 billion in subsidiary UnionDigital Bank Inc. which has been reported to be booking losses recently.
In a disclosure to the Philippine Stock Exchange (PSE), the bank said its board of directors approved the latest capital infusion to support UnionDigital's ongoing business operations and allow it to deliver sustainable growth.
According to Abacus Securities Corporation, UnionBank’s digital unit “booked huge losses in the past few quarters” and its profitability issues may take longer than expected to resolve.
“These issues resulted in a massive decline in lending, the lifeblood of any bank. From a high of P1.5 billion worth of booked loans per month, UD is down to about a third of that and will need to at least double it to cover its costs,” the brokerage said.
It added that “still, the unit's losses should be lower this semester and improve further in 2025, although the range of possible outcomes is expected to be wide. Our base case, therefore, is that UD will break even next year and will ramp up from 2026 onward.”
Prior to this, UnionDigital was one of the fastest digital banks in the world to achieve profitability. It attained a triple-digit percentage growth in its net income during the first half of 2023 compared to the second half of 2022.
The Aboitiz Group-led digital bank, which recently marked its first-year milestone in July 2023, attributed this to the robust loan portfolio growth via the UnionBank ecosystem.
The digital bank’s deposits also saw a 113 percent surge, amounting to P20 billion, which is 32 percent of the market share among digital banks.
Its loan portfolio had grown to P13 billion, notching a 126 percent upswing.
The company shared that it had captured a substantial 75 percent share of the market for loans within the digital banking industry as of May 2023.