Union Bank of the Philippines hit a record P2.76 billion in net income in 2005, 21% higher than the previous year’s P2.28 billion. The bank’s net income has been growing by a compounded annual rate of more than 20% in the past five years. Return on average equity increased to 15.4% in 2005 from 14.2% in 2004 while return on average assets stood at 2.6%. Improved profitability was achieved on top of the 20% increase in provisions for loan losses to P421 million for the year from P350 million in 2004.
The bank’s capital markets businesses showed very strong revenue growth with both accrual and trading gains growing by more than 50%. Consumer and small & medium enterprise finance likewise showed record growth. Interest earnings from credit cards, auto loans, mortgage, and Business Line (a loan product secured by customers’ deposits or real property) accounted for more than one-third of the Bank’s lending income. Earnings from the auto finance business went up by 19% year-on-year due to higher loan volume. The bank’s volume of new auto finance bookings grew by 15% versus car industry sales growth of 10% during the comparable period. Net income from credit cards increased 35% year-on-year with new cards generated reaching close to 45,000. With the improvement in cards profitability and credit quality, UnionBank was cited in October 2005 the Most Outstanding Credit Card Company by the Consumer League of the Philippines Foundation Inc.
Total resources continued to expand to end the year at P108 billion, boosted by the P6-billion expansion in deposits and 27% growth in fund floats volume. Deposit level in 2005 was at P60 billion with hefty growth recorded in savings deposits. Higher brand awareness, stronger sales culture, innovative products & services, and more efficient IT platform have been propping up the bank’s fund generation business.
Strong internal capital generation pushed equity base 27% higher to P19.5 billion in 2005. UnionBank remained among the soundest banks in the industry with a credit risk-adjusted capital adequacy ratio of 46%, four times the Bangko Sentral ng Pilipinas’ minimum capitalization ratio requirement of 10%.