UnionBank hikes bad loans provision to P7 billion for H2

MANILA, Philippines — Aboitiz-led Union Bank of the Philippines has hiked its provision for impairment losses to P6.99 billion in the first half of the year in anticipation of the potential impact of the novel coronavirus disease 29019 or COVID-19 on its loan book.

The amount is more than 19 times the P364 million it allocated for loan losses in the same period last year.

“The bank deemed it prudent to add reserves ahead of the potential impact of the COVID-19 crisis on its credit portfolio,” the bank said in a disclosure to the Philippine Stock Exchange (PSE).

As a result, the profit of the country’s 10th largest lender in terms of assets slipped by six percent to P4.5 billion from January to June this year compared to P4.79 billion in the same period last year.

This translated to a lower return on equity of 9.2 percent from last year’s 11.1 percent.

UnionBank said its topline results remain solid as revenues jumped by 55 percent to P22.1 billion driven by the sustained increase in net interest income, as well as higher trading gains for the year.

It added its net interest income surged by 41 percent to P13.8 billion due to higher earning assets and margin improvement.

Likewise, its other income zoomed by 86 percent to P8.3 billion mainly due to trading gains.

UnionBank reported a 33 percent jump in consumer loans, as well as a 22 percent rise in lending to small and medium enterprises (SMEs). Commercial lending also surged 33 percent from January to June this year.

The Aboitiz-led bank said margins rose 94 basis points to 4.5 percent, driven by lower funding costs resulting from higher current account and savings account deposits, as well as the decline in market interest rates.

As part of its COVID-19 measures, the Bangko Sentral ng Pilipinas (BSP) has so far slashed interest rates by 175 basis points, bringing the overnight reverse repurchase rate to an all-time low of 2.25 percent.

UnionBank also reported a seven percent increase in total assets to P751.5 billion in end June on the back of the 19 percent rise in deposit base to P510.4 billion as of end June.