UNION BANK of the Philippines, Inc. (UnionBank) saw a 19.99% decrease in its net income in the first nine months due to higher expenses following its acquisition of Citigroup, Inc.’s consumer business in the country.
The bank booked a net income of P8.1 billion in the first nine months, down from the P10.13 billion recorded in the same period last year, it said in a disclosure to the local bourse on Tuesday.
Its quarterly report was unavailable as of press time.
“Our diversified consumer business allowed us to cover for the one-time costs that we needed to recognize this year. If we exclude the impact of these non-recurring costs, our RoE (return on equity) would be in double digits. Our topline revenues remain strong. We are confident that once we complete the integration, we can show above-industry profitability we have been known to deliver,” UnionBank President and Chief Executive Officer Edwin R. Bautista said.
The Aboitiz-led bank’s net revenues climbed by 48% year on year to P52.8 billion in the nine-month period.
UnionBank saw its net interest income rise by 34% to P37.31 billion at end-September from P27.78 billion in the same period last year as its loan book grew by 18% to P530.99 billion, driven by the 22% increase in consumer loans.
Interest income climbed to P56.745 billion in the period from P34.631 billion a year prior. Interest expenses surged to P19.438 from P6.856 billion.
“The bank has one of the highest proportions of consumer to total loans in the industry at 56%, resulting in the bank’s above-industry net interest margin of 5.3%,” it said.
UnionBank set aside loan loss provisions worth P9.3 billion in the first nine months, up from P2.33 billion in the same period last year.
Non-interest income surged by 93% to P15.5 billion amid improved fee-based earnings from customer transactions.
Meanwhile, operating expenses jumped by 63% to P33.51 billion from P20.51 billion due to the bank’s acquisition of Citi’s consumer business and as UnionDigital Bank began operating.
“These new businesses were only included as part of the banking group in the second half of 2022. At the same time, the bank has spent a total of P3.6 billion on one-time expenses mainly coming from the integration of the Citi consumer business,” UnionBank said.
“Costs were higher in the third quarter mainly due to integration and other costs that are non-recurring. The integration costs increased since we allocated more time and resources to ensure smooth migration of the acquired Citi consumer business. We also spent on marketing and customer engagement programs to capitalize on the growing consumer segment,” UnionBank Executive Vice-President and Chief Financial Officer Manuel R. Lozano added.
UnionBank’s P55-billion acquisition of Citi’s Philippine consumer banking business was completed in August 2022.
On the other hand, UnionDigital was granted a digital banking license by the Bangko Sentral ng Pilipinas in July 2021. It began operating in July 2022.
Meanwhile, total deposits grew by 6% year on year to P724.7 billion as of September.
UnionBank’s assets climbed by 8% to P1.14 trillion at end-September from a year prior.
The bank’s shares rose by 30 centavos or 0.51% to end at P59.50 apiece on Tuesday. — A.M.C. Sy