Union Bank seeks BSP okay for P5-billion Tier 2 notes issue

MANILA, Philippines -  Union Bank of the Philippines is seeking the Bangko Sentral ng Pilipinas’ approval of its proposed P5-billion Tier 2 unsecured debt notes, issuance which would increase its capital adequacy ratio (CAR) to 14.4 percent.

In a press briefing yesterday, Union Bank president Victor B. Valdepenas said the bank will launch a roadshow for the notes offer as soon as it secures the nod of the BSP.

As of end-June this year, Union Bank’s CAR stood at a precarious 11.4 percent, just slightly above the 10-percent threshold required by the BSP.

Union Bank has a low 35 percent loan-to-deposit ratio against an estimated industry average of over 65 percent. Thus, it targets to increase the ratio to almost 50 percent by yearend.

In 2008, Union Bank’s net income registered at P2.1 billion, a 27-percent drop from P2.9 billion in 2007. This year, the bank is optimistic its net income would ready a little over P3 billion.

In the first six months of 2009, Union Bank’s net earnings rose to P2.196 billion or 83 percent better than P1.2 billion in the same period last year. In the second quarter alone, net income ballooned to P1.63 billion or 171 percent higher than the P601-million year earlier.

The bank said it expects an asset level of about P250 billion by yearend, from P204 billion in 2008. As of June this year, its assets are already worth P218 billion.

Since 2006, its asset growth averaged 19.4 percent annually higher than the industry growth rate of seven percent.

Meanwhile, bank’s non-performing assets (NPAs) stood at just six percent as of June this year from over 16 percent a year ago.

The commercial bank of the Aboitiz Group of Companies said it is looking to grow its branch network to 250 in the next two years. It currently has a nationwide branch network of 169 and 193 automated teller machines (ATM).

Union Bank chairman and chief executive officer Justo Ortiz said the next frontier is in the retail or consumer banking segment. “That is where presence is important,” he stressed.

Its mortgage and auto loan portfolio has expanded 25 percent to P11 billion with the mortgage market taking a slightly larger share.

The middle market, including the small and medium enterprises, meanwhile has been practically inactive for the bank.

Gross loans stood at P59 billion at the end of the first semester of 2009, while total outstanding deposits registered at P173.6 billion.