Union Bank net profit drops 26% to P1.1B in H1

By Ted P. Torres
The Philippine Star 08/02/2006

Union Bank of the Philippines reported a 26-percent drop in its net income in the first half this year due to expenses related to the acquisition of medium-sized rival International Exchange Bank.

From the P1.5-billion profit realized in the first six months of 2005, net earnings dropped to P1.1 billion in the same period this year.

In a report to the Philippine Stock Exchange (PSE), bank officials said that the weaker margin was also attributed to slipping domestic interest rates.

"But consumer finance, cash management, and capital markets businesses remained consistent suppliers of income," it added.

A total of P140 million in loan-loss reserves was provided, bringing the bank’s non-performing loans (NPL) cover to 83 percent as against the commercial bank industry average of 78 percent.

Efficiency and profitability ratios remained well above industry averages. Return on average equity was 12 percent and return on average assets was two percent during the first half of the year.

Total resources, however, expanded to P108 billion in June this year from P105 billion in the same period last year.

The bank said its aggressive marketing strategy paid off with low-cost deposits rising to P1 billion. Capital base expanded to P17.6 billion, bringing the capital-to-risk assets ratio to 36 percent.

Last June, Union Bank purchased 98.8 percent of iBank shares through a special block sale coursed through the PSE.

The merger with iBank is expected to create the industry’s seventh largest private universal bank with assets of around P170 billion and deposit base of close to P100 billion.

The combined branch network of 191 is expected to place sixth in the industry.

The Aboitiz-led commercial bank recorded a 21-percent increase in net income, from P2.28 billion in 2004 to P2.76 billion in 2005. In 2003, net income was recorded at P2.15 billion from P1.5 billion in 2002 and P1.1 billion in 2001. It has been growing by a compounded annual rate of more than 20 percent in the past five years.

Union Bank plans to barge into the top three universal banks by 2010 by averaging yearly an income growth of between 25 to 30 percent.

 

http://www.philstar.com/philstar/NEWS200608020704.htm