Union Bank of the Philippines: An Outperformer

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Strong growth protects the bank from gross abandon

Union Bank of the Philippines (UBP) has outperformed its peers so far this year. Shares of the ninth largest Philippine bank by assets climbed 6% while peers have floundered along with the broader market.

In 2017, UBP’s net interest income (fancy name for revenue for banks) grew 18.9% rise while profits dropped 16.4%.

Excluding one-time gains, however, led to an impressive 30% rise in profits.

UBP’s book value stood at 74 billion giving it a price-book value multiple of 1.3x compared to its industry’s 3x.

The bank’s CET 1 ratio improved to 11.5% in 2017 compared to 13% in 2016.

Non-performing loan ratio, meanwhile, was at 3.4% compared to 3.9% in 2016.

“We are pleased to continue making major headway on both our business and digital transformation strategies. Financial results were driven by recurring income across all customer business segments. Simultaneously, we were able to attain milestones on the user experience front: 1) EON Digital Bank as the first with selfie-banking feature in Asia; 2) the UnionBank mobile app and web versions with enhanced transactional capabilities; and 3) the launch of our concept branch, “The Ark”, that introduced the “future of branch banking” in the country. Amid investments in various digital initiatives, the Bank continues to sustain very solid profitability results.”

Edwin R. Bautista, UnionBank President and CEO

In the past three years, UBP raised 21.8 billion in financing activities while having provided 6.6 billion in dividends.

The bank ended with 132.2 billion in cash in 2017.

COL Financial rates UBP as a buy with a value of 107/share vs. 90/share at the time of writing. Personal estimates indicated a per share figure of 142/share.

Disclosure: No shares in UBP.

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