Union Bank hikes corporate lending by 79% in Jan-June

Union Bank of the Philippines reported a 79-percent increase in corporate loans in the first semester of this year, reflecting its heightened focus on core lending businesses,  the bank’s chief executive said.

UnionBank chairman and chief executive officer Justo A. Ortiz said  despite the prevailing depressed economic environment, the bank remained focused on  its core business of lending.

“We are profiting from our core business strategy which, coupled with our commitment to asset quality and effective risk management, will position the bank well for the remainder of 2008.”

UnionBank’s focus on lending was likewise reflected in the 18-percent growth in consumer lending while companies in the energy, gas and water, and real estate development sectors sought further funding from loans.

In a presentation to analysts and investors, Ortiz said the bank focused  on its strategy to utilize low-cost deposits to fund the increase in its lending activity, as indicated by the marked decline in its average deposit rate of 2.6 percent in the first half from 3.2 percent in the comparable period last year.   

”The bank’s cost efficiencies helped widen its net interest margin to 4.3 percent in the first half from last year’s 3.3 percent. Net interest income, consequently, improved by 13 percent or P316 million during the same period, exceeding expectations,” he added.

 Investment house ATR KimEng Securities Inc. has cited UnionBank for pursuing a growth strategy anchored more convincingly on its fundamental source of strength. With the upswing in net loans, accelerating from 18 percent year-on-year in the first quarter to 39 percent in the second quarter, ATR KimEng said its business strategy will enable the expansion of the bank’s recurring income base and dispel perceptions pointing to its heavy dependence on trading income to maintain profitability.

The commercial bank of the Aboitiz Group of Companies recorded a 45-percent drop in net income in the first six months of 2008 to P1.2 billion. The huge decline, however, was attributed to extraordinary income generated from trading and sale of assets in the first semester of 2007, while external market volatilities, including high oil and commodity prices, also took their toll this year.

In the first semester this year, UnionBank earned mainly from its recurring business or from deposits and loans including fee-based earnings.

Deposits grew 35 percent while loans registered a 38-percent growth rate.