UnionBank sees more room for credit growth

MANILA, Philippines — The Union Bank of the Philippines and its subsidiary banks see more room for credit growth this year amid the scheduled cuts in banks’ reserve requirement ratio (RRR) this year, a top official said yesterday.

In an interview, UnionBank president and chief executive officer Edwin Bautista said the bank is expecting loan growth to reach as much as 18 percent this year, higher than the initial target of 16 percent.

“The original target was about 16 percent in total, but on the parent bank it’s closer to 20 (percent). So far, we’re already over 16 percent,” Bautista said.

“We think it will grow even higher than what we originally forecast. So in the first quarter we were already at 16 percent. We think going forward this will be higher, at (around) 18 percent,” he said.

According to Bautista, the bank and its subsidiaries were able to increase loan releases in the first quarter by 16 percent, higher than the industry average, despite a higher interest rate environment.

He said this may be further boosted in the next quarters due to the Bangko Sentral ng Pilipinas’ move to cut reserve requirements.

“Because of the reserve cuts, then interest rates will not be as high, so it will be easier to book the loans. So if you are at 16 percent (with) interest rates moving up, once interest rates go down you should be able to book a little bit more. So we’re really pushing hard to get more loans,” Bautista said.

Earlier, the BSP decided to slash RRR for universal and commercial banks in three stages, starting with 100 basis points effective May 31, followed by 50 basis points on June 28, and another 50 basis points on July 26. This would bring the RRR level to 16 percent from the current 18 percent.

The central bank likewise cut the RRR for thrift and mid-sized banks to six percent from the current level of eight percent in three tranches similar to the schedule for universal and commercial or big banks.

According to latest data from the central bank, outstanding loans of universal and commercial banks grew by 12.7 percent to P8.41 trillion from P7.46 trillion in the same month last year. This was slightly slower than the growth rate of 12.9 percent recorded last March.

Meanwhile, UnionBank conducted the listing of its P5.8 billion three-year fixed rate bonds on the Philippines Dealing Exchange (PDEx). This marks the bank’s 12th listing for the year.

UnionBank said the issuance, which is part of its P39 billion bond and commercial paper program, was upsized from the initial target volume of P3 billion after receiving strong demand from institutional and retail clients.