Union Bank hopes to approximate ’07 performance

Like most commercial banks in the Philippines, Union Bank of the Philippines (Union Bank) said it would be satisfied if it could approximate its profit growth  last year.

Most commercial banks have reported lower net earnings for the first six months of 2008 mainly due to high inflation resulting from high global prices of oil and basic commodities, which affected the investment appetite of the market.

Union Bank executive vice president Edwin R. Bautista said that minimizing the decline in earnings this year versus the previous year is the name of the game.

“If we can match what was achieved last year that would be very good,” Bautista said in an interview.

The commercial bank of the Aboitiz Group of Companies recorded a 45-percent drop in net income in the first six months of 2008, or from P2.2 billion from January to June last year to P1.2 billion.

The huge drop in earnings was attributed to extraordinary income generated from trading and sale of assets in the previous year, and external market volatilities, including high oil and commodity prices this year.

In the first semester this year, Union Bank earned mainly from its recurring business or from deposits and loans including fee-based earnings, and practically no trading gains.

“That is the reason we are very bullish on the second half of the year. Our deposits so far grew by 35 percent, and loans registered a 38-percent growth rate versus end 2007 results,” the bank official said.

Adding to the positive environment is the continuing decline in oil and commodity prices although the peso has been depreciating against the dollar lately.

Based on the bank’s July results, gains are starting to be realized from trading and foreign currency activities.

“But the core business will not weaken as that is our recurring business. If the volumes of May and June can be sustained until the end of the year, that could be a good momentum for the rest of the year  to approximate our 2007 results, minus the one-time gain,” Bautista added.

Banks have been reporting lower growth rates in the first semester of 2008 versus the same period in 2007. However, the results were still net gains albeit lower than the previous year which was a good year for both the banks and the economy in general.

Unlike in the US where their banks were reporting actual losses, Philippine banks were only reporting lower growth rates in net income.

“The fundamentals are good. We are not in the same boat as the US banks. They report actual losses while Philippine banks are just making less than the previous periods,” the Union Bank executive stressed.

Bautista said the integration of acquired International Banking Corp. (iBank) came at an appropriate time.

“We bought iBank for two reasons, one is the middle market loan portfolio and the other for its strong low-cost deposit base. Both are contributing significantly at a time when trading gains are at its low,” Bautista said. — Ted Torres