Investment house ATR KimEng Securities Inc. has commended the Union Bank of the Philippines (Union Bank) for continuing to grow its balance sheet at an impressive pace after exhibiting three consecutive quarters of robust development in its lending business and interest income position.
The analysis was made despite the prevailing global credit crunch crisis affecting the global economies including the Philippines as well as recognizing the bank’s strong potential to move to the next level.
ATR KimEng noted that UnionBank’s substantial recurrent increase on its deposit base and loans strongly indicates stability and effective strategy execution.
That strategy allowed the bank to capture and optimize opportunities for revenue expansion in spite of market adversities.
Likewise, the investment house noted UnionBank’s expanding market share as deposits jumped by 45 percent year-on-year and 43 percent year-to-date, and loans increased by 72 percent year-on-year and 62 percent from the end of last year.
Although the bank’s profitability was hampered by tighter margins and foreign exchange losses, ATR Kim Eng maintained its strong position on Union Bank putting emphasis on the use of adequate safeguards.
These safeguards were designed to protect it from the prospect of higher default rates as economic growth slows down.
The investment house however poised challenges on Union Bank’s ability to maintain a hold on cheap funding.
“It will be put to the test as the situation stabilizes,” it added.
ATR KimEng noted that the expansion in the balance sheet could translate into a more palpable profitability, citing the eight-percent year-on-year increase in interest income and the posting of a P2-million third quarter trading profit, reversing a second quarter trading loss.
“It is an encouraging sign that could potentially elevate Union Bank into the next level as it continues to pursue growth amid the crisis,” ATR KimEng said in a statement.
Meanwhile, UnionBank chairman and chief executive officer Justo A. Ortiz said that the bank’s strategy to anchor growth on more sustainable revenue sources continued to deliver strong results in the third quarter.
Net income increased by 19.4 percent to P484.2 million on a year-on-year comparison, bringing year-to-September profit to P1.7 billion.
“Confronted by an environment of heightened uncertainty and volatility, we proved our position of undeniable stability and financial security as we recorded accelerated growth trends in our deposit generation and lending activity. Our recent performance results substantiate how our commitment to our strategic vision is helping us sustain progress against a backdrop of shifting economic cycles,” Ortiz added.