Union Bank Of The Philippines · PSE:UBP
Union Bank Of The Philippines — Q3 2023 Earnings Presentation
25 slides from Union Bank Of The Philippines's earnings presentation, Nov 7, 2023
Slide 1: Third Quarter 2023 Financial & Operating Results
Third Quarter 2023 Financial & Operating Results Tuesday, November 7, 2023
Slide 2: Analysts' Briefing, November 7, 2023
Briefing November 7, 2023 2:30 PM PHT UnionBank Stig) et2028 Together we are building the PH's first techglomerate
Slide 3: Disclaimer
Disclaimer This presentation and the information contained herein (this "Presentation") are the sole and exclusive property of Aboitiz Equity Ventures (“AEV”) and shall only be used for the purpose intended herein and may not be used, published or redistributed without the prior written consent of A
Slide 4: Agenda
Agenda Johnson Sia 1. Macroeconomic and Industry Outlook Treasurer and Head of Global Markets Dmi Lozano 2. Financial Performance Chief Financial Officer
Slide 5: Macroeconomic and Industry Outlook
Macroeconomic and Industry Outlook
Slide 6: Just 15% chance of another hike in the US
Just 15% chance of another hike in the US • Powell called for a pause in November meeting; FOMC delivered • Recent steepening in yield curve would have comparable tightening effect to hikes
Slide 7: Peak rate projections were consistent throughout the year
Peak rate projections were consistent throughout the year 1. Hawkish Fedspeak 2. SVB Fallout 3. Higher-for-longer • Hawkish Fedspeak caused shift in market policy projections at the start of the year - More hawkish due to combination of sticky inflation, tight labor market and resilient housing pric
Slide 8: Steepening over last 2 months presents interesting value for longer dated bonds
Steepening over last 2 months presents interesting value for longer dated bonds Fed Funds Mid = 5.375
Slide 9: Spike in longer dated bond yields keeping financial conditions tight
Spike in longer dated bond yields keeping financial conditions tight; Market doing the Fed’s job for them
Slide 10: BSP signals further tightening after off-cycle hike
BSP signals further tightening after off-cycle hike ◆ Policy rate raised by 25bps in an off-cycle move to 6.5% ◆ MB recognized the need for urgent monetary action to prevent supply-side price pressures from inducing additional second-round effects and further dislodging inflation expectations ◆ BSP
Slide 11: Food adding the most in past 2 readings; higher minimum wages and jeepney fares
Food adding the most in past 2 readings; Higher minimum wages and jeepney fares may stoke inflation further • Jeepney fares up by P1 this month, base fare starts at P13 • Minimum wage hikes in 3 regions - Cagayan Valley, Central Luzon and Socsargen
Slide 12: PHP curve also steepens, auction schedule to pressure rates higher
PHP curve also steepens, auction schedule to pressure rates higher BSP RRP =6.50
Slide 13: PHP expected to hold 57 level as BSP hikes and restores wider IRD
PHP expected to hold 57 level as BSP hikes and restores wider IRD 57.00
Slide 14: Financial Performance 9M/3Q 2023
Financial Performance 9M/3Q 2023
Slide 15: UnionBank 9M2023 net income at P8.1 bn
UnionBank 9M2023 net income at P8.1 bn Net income slowdown is driven by one-time integration cost of the acquired Citi business and other non-recurring costs. Business fundamentals remain strong and the Bank’s topline revenues continue to record robust growth. The diversified consumer portfolio and
Slide 16: YTD NII up 34% due to strong margins and earning assets
YTD NII up 34% due to strong margins and earning assets Net Interest Income Net Interest Margin Cost NIM Yield (in PHP Bn) 7.9% 7.9% 8.1% YoY 6.5% 🔺 216 bps Interest Income Interest Expense Net Interest Income 5.7% 5.6% 5.9% 🔺 24% YoY YoY 5.2% 5.2% 5.3% 🔺 57 bps 🔺 64% 5.0% 🔺 7% QoQ 56.7 4.7%…
Slide 17: Diversified consumer loans post double-digit growth
Diversified consumer loans post double-digit growth Gross Loans Loan Mix Industry’s Consumer Loans – 19% (OSB in PHP Bn) (%) Based on BSP data as of June 2023 Corporate Commercial Retail (Parent) CSB, UD & Other Subs 🔺 19% YoY 🔺 2% QoQ 24%, 44%, Mortgage 30%, Consumer Loan Corporate 56%, Salary…
Slide 18: Sustained CASA growth
Sustained CASA growth Total Deposits (Consolidated) CASA Deposits (Consolidated) (ADB in PHP Bn) (ADB in PHP Bn) Peso FCDU Peso FCDU Share of CASA to Total Deposits 🔺 18% YoY 800 80% 🔺 0% QoQ 62% 63% 63% 60% 59% 58% 59% 60% 700 689 699 702 🔺 9% YoY 40% YoY 600 621 87 90 93 🔺 5% 🔻 0% QoQ 594…
Slide 19: Customer transactions driving recurring fee and other income
Customer transactions driving recurring fee and other income Non-Interest Income YTD Fee and Other Income (in PHP Bn) (in PHP Bn) Fee and Other Income Gain on Sale/Foreclosure Securities Trading Gains 🔺 45% YoY 9M22 9M23 🔻 14% QoQ YoY 15.5 🔺 93% Customer 🔺 5.3x Transactions 69%, 4.7 76%, 10.3…
Slide 20: OPEX growth mainly due to new businesses and one-time cost
OPEX growth mainly due to new businesses and one-time cost Operating Expenses Cost-to-Income Ratio (in PHP Bn) (%) Core OPEX New Businesses Integration and One-offs 63% 63% CIR 63% 🔺 36% YoY YoY 35.0 33.5 🔺 63% 60% 🔻 0% QoQ 7% 59% 7% Integration Cost 3.6 🔺 7.4x 2% 6% and One-offs 30.0 57% 56%…
Slide 21: Consumer NPL Ratio is in line with industry average
Consumer NPL Ratio is in line with industry average NPL Ratio NPL Ratio (Consumer) UBP Industry UBP Industry 9.0% 8.1% 7.2% 6.5% 6.4% 6.3% 5.2% 4.9% 4.8% 5.0% 5.5% 4.4% 4.4% 7.7% 7.2% 6.8% 5.7% 5.7% 6.1% 6.3% 4.3% 3.8% 3.6% 3.3% 3.5% 3.6% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 1Q22 2Q22 3Q22 4Q22 1Q23 2
Slide 22: Provision for credit losses increased due to new businesses and select legacy corporate accounts
Provision for credit losses increased due to new businesses and select legacy corporate accounts Credit Cost Loan Mix Base Credit Cost New Businesses One-offs 🔺 166 bps 2.3% UnionBank Industry 0.7% Corporate and Commercial, Corporate Consumer, 81% and 56% vs Commercial, 1.0% 44% Consumer, 0.7% 19%…
Slide 23: Capital ratios provide room for growth
Capital ratios provide room for growth Capital Adequacy Ratio (CAR) Common Equity Tier 1 Capital Ratio (CET1) 22.7% 20.6% 16.9% 13.7% 15.5% 16.2% 15.6% 14.9% 13.9% 14.5% 13.9% 11.9% 13.0% 11.3% 10% regulatory 8.5% minimum regulatory minimum 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Aug-23 1Q22 2Q22 3Q22 4Q22 1Q
Slide 24: Key Takeaways
Key Takeaways 1 Diversified consumer portfolio and growing customer base drive recurring income Costs were elevated due to one-time integration costs of the acquired Citi consumer 2 business and other non-recurring costs 3 Excluding the impact of the one-time costs, normalized ROE would be in double
Slide 25: Thank You!
Thank You!
Union Bank of the Philippines — Q3 2023 Earnings Presentation on 6ix