Union Bank income contracts 45% to P1.2 B in first semester

The Aboitiz-controlled Union Bank of the Philippines suffered a 45-percent drop in its net income in the first six months of 2008 to P1.2 billion, from P2.2 billion in the same period a year ago, the bank said in a statement.

“The huge drop in earnings was due mainly to extraordinary income generated from trading and sale of assets in the previous year and external market volatilities, including high oil and commodity prices,” it said.

Majority of the country’s commercial banks have likewise reported losses in first semester income due to the poor economic and investment climate.

In an earlier interview, UnionBank president and chief operating officer Victor B. Valdepenas said that a targeted 3.4-percent growth in net income this year is “good enough.” The bank’s earnings stood at P2.9 billion last year.

“We see a poor environment ahead which has made us cautious in our optimism,” Valdepenas said.

Net interest income, however, rose 13.1 percent to P2.7 billion on stronger core business performance.

Interest income from loans likewise grew 15.2 percent to P2.1 billion on the back of a 38.8-percent growth in corporate, commercial and consumer finance loans to P54.5 billion.

Similarly, interest income on trading and investment securities jumped 48.3 percent to P1.5 billion.

On the other hand, interest expense on deposits and bills payables dropped 36 percent to P1.7 billion from last year due to a reduction in deposit cost and funding requirements.

Operating income reached P3.9 billion while operating expenses remained flat at P2.6 billion.

UnionBank sustained its commitment to cost discipline and efficiency by pursuing process improvement initiatives and developing technologically-advanced solutions.

The asset base of the commercial bank stood at P177.7 billion in the first semester of 2008, with its deposit level at P131.8 billion.

Capital adequacy ratio (CAR) at 13.3 percent, inclusive of credit, market and operational risk charges. It stood at 14.6 percent at the start of the year.

UnionBank rationalized its branch network down to 166 from nearly 190. Majority of the freed-up branch licenses will be positioned in new areas outside of Metro Manila. Likewise, it operates a total of 187 automated teller machines (ATMs).    – Ted Torres