AUB posts P383M net income in Q1

MANILA, Philippines - The Asia United Bank (AUB) reported yesterday a sharp 126-percent increase in net income to P383 million in the first three months of the year from P170 million a year ago.

The growth was due largely to the bank’s strong trading gains of P444 million, which was more than 17 times the previous year’s level.

An additional P86-million from excess earnings were repositioned for loan loss provisions to further strengthen its financial position.

AUB executive vice president and head of treasury Antonio V. Agcaoili said that many consider trading income as “one-off” gains that could not be sustained in the long haul due to the unpredictability of the financial markets.

Agcaoili said diversifying the bank’s treasury portfolio is part of a holistic and long-term strategy to aggressively build up its financial muscle, in addition to strengthening its core businesses and expanding its nationwide presence.

“What made ours different is that we have managed to sustain these trading gains since we started diversifying into emerging markets in 2003,” he explained.

The medium-sized bank started to look offshore for trading opportunities back when the so-called BRICS (leading emerging economies, namely Brazil, Russia, India and China) was yet to be coined as an acronym and the likes of Argentina was still regarded as a highly indebted country.

“We entered Brazil when the popular Luis Inacio Lula de Silva, considered the most effective and successful leader in their history, was newly elected. The rest was history. Brazil became a net creditor in the external markets and became investment grade shortly thereafter,” said Agcaoili. “We follow the same investment strategy and discipline in countries like Russia, Indonesia and Qatar – all excellent credits in the emerging market universe.” 

Philippine banks must still rely on organic growth – shoring up low-cost deposits and lending to individuals and businesses – but they should also not discount the opportunities in other markets outside of the Philippines.

“There are a lot of economic benefits in trading in emerging markets, such as risk-weighted return on capital. For a bank like AUB, this is one way we can level up and compete, particularly if interest rates continue to fall and demand for fresh loans is weak,” he explained.

Trading incomes also come in handy for a bank that continues to be on an acquisition mode.

In just a span of three years, AUB bought Rural Bank of Angeles, boosting its presence outside Metro Manila; the Cooperative Bank of Cavite, which is awaiting approval from the Bangko Sentral ng Pilipinas (BSP); and Asiatrust Development Bank, which will expand AUB’s nationwide presence to 102 branches to serve more customers.