UnionBank income plummets in Q1

MANILA, Philippines — Union Bank of the Philippines booked a net income of P2 billion in the first quarter, down by 41.2 percent from the same period a year ago, as the bank continued to allocate resources toward its takeover of the retail banking business of global banking giant Citi in the Philippines.

UnionBank officials told The STAR that its net income in the same quarter last year was at P3.4 billion.

“In the first quarter of 2024, we are still gaining traction in terms of metrics that matter and business fundamentals remain strong,” the bank said in an email. “Our customer base continues to grow, ensuring ongoing growth in recurring income moving forward.”

In a disclosure to the Philippine Stock Exchange, the Aboitiz-led bank said it allocated resources towards the migration of the acquired Citi consumer business into its systems.

“While this temporarily affected our profitability, it was a planned initiative aimed at unlocking long-term benefits and efficiencies,” the lender said.

The bank said it transferred millions of customer and transaction records from Citi to UnionBank’s platforms, successfully completing the final phase of the integration on March 24.

“We exited the transition service agreement last March which will lead to a significant increase in net income from April onwards,” UnionBank said.

UnionBank chief financial officer Manuel Lozano said the bank’s first quarter performance was in line with expectations.

“Now that we have successfully completed the Citi migration, we will no longer bear the one-time costs associated with it starting this month. We will now focus our efforts on realizing the full gains from cross-selling to our growing customer base,” Lozano said.

Meanwhile, the bank’s revenue grew by 14 percent year on year in the first quarter, mainly driven by rising consumer loans, higher net interest margins and growth in transaction fees.

UnionBank reported a 17-percent increase in net interest income to P13 billion from January to March. Net interest margins went up by 59 basis points to 5.7 percent.

Non-interest income excluding trading gains rose by 13 percent to P4.7 billion in the first quarter.

The lender’s operating expenses jumped by 10 percent to P11 billion from, attributable to IT-related costs supporting the migration of Citi retail accounts into UnionBank systems.

The bank incurred a one-time integration cost of P1.1 billion in the first quarter. The bank’s marketing investments also resulted in a significant increase in new-to-bank credit card customers, which led to a higher customer acquisition rate.