Union Bank of the Philippines, a member of the Aboitiz Group, reported a 41 drop in net income to P2 billion for the first quarter of 2024 from the P3.4 billion earned in the same period last year due to costs related to the integration of Citi’s consumer business.
UnionBank Chief Financial Officer Manuel R. Lozano, in a disclosure to the Philippine Stock Exchange, said the first quarter performance is in line with the bank's expectations. "We are even ahead in terms of key metrics that matter for sustainable growth, such as number of retail customers, net interest margins, and fees-to-assets,” said Lozano.
He noted that with the successful completion of the Citi migration, Unionbank will no longer bear the one-time costs associated with it starting this month. "We will now focus our efforts to realizing the full gains from cross-selling to our growing customer base,” he said.
In its disclosure, Unionbank pointed out that the bank's topline revenues remained strong, growing by 14 percent to P18.35 billion from P16.1 billion in the first three months of 2023.
“This is attributable to the growing proportion of consumer loans, higher net interest margins, and transaction fees,” the bank added.
Net interest income grew by 17 percent to P13 billion driven by a 59bps improvement in net interest margins now standing at 5.7 percent. Non-interest income excluding trading gains, went up by 13 percent to P4.7 billion.
Its consumer loans now account for 59 percent of total loan portfolio, nearly three times higher than industry average.
UnionBank allocated resources towards the migration of the acquired Citi Consumer business into UnionBank systems. While this temporarily affected our profitability, it was a planned initiative aimed at unlocking long- term benefits and efficiencies.
On March 24, 2024, the bank successfully completed the final phase of the Citi integration, which involved the transfer of millions of customer and transaction records from Citi to UnionBank’s platforms.
The bank's operating expenses rose by 10 percent to P11 billion, driven by IT-related costs supporting the successful migration of Citi retail accounts into UnionBank systems. A one-time integration cost of P1.1 billion was incurred in the first quarter of 2024.
Additionally, the Bank’s marketing investments resulted in a significant increase in new-to-bank credit card customers; more than doubling last year’s customer acquisition rate.
“We now have a bigger base of customers who we can offer our other products and services to,” the bank said.
Total assets as of March 2024 ended at P1.1 trillion. Total loans reached P521 billion, while low-cost CASA deposits were at P431 billion.