Union Bank profit down 63% to P602.5M in Q1

The Aboitiz-led Union Bank of the Philippines reported a net income of P602.49 million in the first quarter of 2008, down 63 percent from P1.63 billion in the same period last year, due to lower trading gains, the bank said in a statement yesterday.

However, bank chairman and chief executive Justo A. Ortiz said “increased lending business resulting from more aggressive credit positioning raised net interest income by 21.64 percent to P1.25 billion and efficient operational management reduced operating costs by 7.82 percent to P1.21 billion.”

Its net loan portfolio expanded 18.07 percent to P46.9 billion on the back of solid expansion in the corporate, commercial and consumer finance business.

“Our strategy of seeking appropriate risk-adjusted return is paying off in this volatile environment and we will continue to optimize the value of business opportunities to the quality and growth of our profitability,” Ortiz added.

The expansion in net interest income was mainly attributable to the 6.94-percent growth in interest income from lending and the 37.57-percent rise in interest income from securities.

There was also a 35.66-percent reduction in interest expense on deposits and bills payable due to the reduction in deposit cost and funding requirements.

Total operating income amounted to P1.91 billion in the first quarter of 2008, or 39.1 percent lower than the P3.14 billion  a year ago, reflecting the bank’s deliberate strategy to mitigate the downside implications of negative market environment through more calibrated engagement in the capital market and the base effect arising from one-off gains from non-recurring transactions in the previous year.

Total operating expenses, meanwhile, amounted to P1.21 billion, or 7.82 percent lower than the previous year’s P1.32 billion, due to sustained improvements in productivity and cost management.

“We will take our already very good cost management system yet further while increasing the robustness and durability of our earnings stream this year,” said bank president and COO Victor B. Valdepeñas.

He reported that the bank’s asset base stood at P160.13 billion as of end-March, while its deposit level stood at P107.72 billion. 

Capital base rose 23.94 percent to P26.47 billion from P21.36 billion due to strong internal capital generation and proceeds from the follow-on equity offering during the first semester of 2007.

Capital adequacy ratio (CAR) was at 14.6 percent, inclusive of credit, market and operational risk charges.

Non-performing loans (NPLs) stood at P4.667 billion, or 5.91 percent of total loan portfolio. Provisioning for losses, on the other hand, reached P1.6832 billion.