Union Bank Of The Philippines · PSE:UBP
Union Bank Of The Philippines — Q1 2024 Earnings Presentation
36 slides from Union Bank Of The Philippines's earnings presentation, Apr 29, 2024
Slide 1: Analysts' Briefing, April 29, 2024
Briefing April 29, 2024 2:15 PM PHT UnionBank } 2} 2025 Together we are building the PH's first techglomerate
Slide 2: 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 3: Agenda
Agenda Johnson Sia 1. Macroeconomic and Industry Outlook Treasurer and Head of Global Markets 2. Financial Performance Dmi Lozano Chief Financial Officer 3. Strategy Updates – Consumer Banking Manoj Varma Head of Consumer Banking
Slide 4: Macroeconomic and Industry Outlook
Macroeconomic and Industry Outlook
Slide 5: Policy expectations in US/PH moving towards later cuts on resilient US economy
Policy expectations in US/PH moving towards later cuts on resilient US economy • At start of 2024, rate cuts heavily priced in with expectations of as many as 6.7 cuts for the year • Since then, rates have moved higher as rate cut expectations moderate o Fed speakers consistently trying to walk back
Slide 6: Market expecting 1.6 cuts vs. Fed Dots at 3.0 cuts
Market expecting 1.6 cuts vs. Fed Dots at 3.0 cuts Current Market Expectations Fed Dots
Slide 7: EOY 2024 at 4.93 (1.6 cuts) clearing Oct 2023 highs
EOY 2024 at 4.93 (1.6 cuts) clearing Oct 2023 highs
Slide 8: Despite higher policy expectations, USTs 40-50 bps off 2023 highs
Despite higher policy expectations, USTs 40-50 bps off 2023 highs
Slide 9: USD Asian EM Bond space leaves some room for yield pickup
USD Asian EM Bond space leaves some room for yield pickup
Slide 10: Oil elevated due to Iran-Israel conflict, OPEC+ supply cuts
Oil elevated due to Iran-Israel conflict, OPEC+ supply cuts
Slide 11: BSP says first rate cut may come in Q4 of this year
BSP says first rate cut may come in Q4 of this year • The window for BSP to start cutting rates in 2H 2024 is narrowing as inflation may breach target for a third straight year o “We have plenty of time. I would say the central scenario would be fourth quarter we ease. If things are worse, then we m
Slide 12: Headline inflation accelerated for the second straight month to 3.7%
Headline inflation accelerated for the second straight month to 3.7% amid rising food cost • BSP Gov Remolona clarified that the BSP has not been actively intervening in FX, citing the current levels as consistent with the upward trend observed across the rest of USD/Asia
Slide 13: GS curve bear steepens from end-2023 levels
GS curve bear steepens from end-2023 levels
Slide 14: Financial Performance Q1 2024
Financial Performance Q1 2024
Slide 15: Strong growth in customers & revenues
Strong growth in customers & revenues Customer Growth (in #, Mn) Net Interest Margin 5.7% 5.5% 14.7 5.1% 13.9 13.0 4.8% 11.8 4.5% 4.6% 8.9 59 7.1 3.7% 14% bps 4.7 2019 2020 2021 2022 2023 1Q23 1Q24 2019 2020 2021 2022 2023 1Q23 1Q24 Net Revenues (in P, Mn) Fees and other income (net of trading) to A
Slide 16: UnionBank 1Q24 net income at P2 bn
UnionBank 1Q24 net income at P2 bn The parent bank is pivotal in driving group's net income, with higher net interest margins (NIMs), improved CASA ratio, and increased customer transactions. The decrease in net income is due to UnionDigital temporarily pausing its lending activities to enhance inte
Slide 17: NII up 17% due to higher margins and earning assets growth
NII up 17% due to higher margins and earning assets growth Net Interest Income Net Interest Margin Cost NIM Yield (in PHP Bn) YoY 8.1% 8.3% 8.5% 82 bps 7.7% 7.9% Interest Income Interest Expense Net Interest Income 59 bps 5.1% 5.2% 5.3% 5.5% 5.7% 8% QoQ 23 bps YoY 2.6% 2.7% 2.8% 2.8% 2.8% 21.8 20.3
Slide 18: Diversified consumer loans ~3x higher than industry
Diversified consumer loans ~3x higher than industry Gross Loans Loan Mix Industry’s Consumer Loans – 20% (OSB in PHP Bn) (%) Based on FY 2023 BSP data Corporate Commercial Retail (Parent) CSB, UD & Other Subs 23%, 7% YoY Mortgage 0% QoQ 34%, Consumer Loan 41%, Corporate and 32%, Salary 59%, Portfoli
Slide 19: Sustained CASA growth
Sustained CASA growth Total Deposits (Consolidated) CASA Deposits (Consolidated) (OSB in PHP Bn) (OSB in PHP Bn) Peso FCDU Peso FCDU Share of CASA to Total Deposits 0% YoY 800 80% 3% QoQ 60% 59% 60% 62% 56% 60% 725 713 700 693 693 691 3% YoY YoY 40% 115 99 600 89 83 97 9% 0% QoQ 20% 500 416 429 430
Slide 20: Retail customer transactions driving fee income
Retail customer transactions driving fee income Non-Interest Income YTD Fees (in PHP Bn) (in PHP Bn) Fees Forex Gain on Sale/Foreclosure Securities Trading Gains 1Q23 1Q24 5.9 Parent Customer 73%, 81%, 49% QoQ Transactions 2.6 3.2 0.4 YoY 0.5 5.0 4.9 4.9 6% 4.6 0.5 0.4 0.2 4.6 0.2 57% 0.4 0.4 15%, 4
Slide 21: OPEX growth mainly due to customer growth
OPEX growth mainly due to customer growth Operating Expenses Cost-to-Income Ratio (in PHP Bn) (%) 63% 63% 63% 63% Core OPEX Integration and One-offs 60% CIR 7% 7% 7% 3% QoQ 6% 11.7 11.7 YoY Integration Cost 11.4 6% and One-offs 11.0 11.0 10% 1.4 1.2 10.1 1.3 10.1 10% 1.1 1.1 1.0 1.0 56% 56% 57% 56%
Slide 22: Credit cost inc. due to growing consumer portfolio
Credit cost inc. due to growing consumer portfolio Credit Cost Loan Mix One-offs Parent bank Subsidiaries UnionBank Industry 33 bps 3.0% 2.7% 0.6% 1.3% Corporate and Commercial, 80% Consumer, 59% Corporate and vs Commercial, 41% 1.4% Consumer, 20% 1.5% 0.8% Source: FY 2023 BSP Data 0.2% FY23 Annuali
Slide 23: NPL ratio reflect growing consumer portfolio
NPL ratio reflect growing consumer portfolio NPL Ratio NPL Ratio (Consumer) UBP Industry UBP Industry 5.5% 8.6% 7.2% 23bps 7.1% 6.8% 6.3% 6.3% Vs FY 2023 6.1% 5.0% 5.5% Industry 4.8% Parent Consumer 6.4% 6.3% 6.0% NPL Ratio 5.8% 3.5% 3.6% 3.6% 3.5% 1Q23 2Q23 3Q23 4Q23 1Q24 1Q23 2Q23 3Q23 4Q23 1Q24 N
Slide 24: Capital ratios above regulatory limits
Capital ratios above regulatory limits Capital Adequacy Ratio Group (CAR) Common Equity Tier 1 Capital Ratio Group (CET1) Common Equity Tier 1 Capital Ratio Parent (CET1) 15.8% 16.2% 15.5% 15.7% 15.3% 14.5% 14.0% 13.9% 13.2% 13.9% 13.9% 13.6% 13.4% 13.2% 12.4% 10% regulatory 8.5% 8.5% minimum regula
Slide 25: Key Takeaways
Key Takeaways Recent Developments Outlook The bank has completed the Citi integration and Expected reduction in expenses has exited in the TSA in March 2024 starting April onwards SRO is approved and will be done by the 2nd Sufficient capital to support the growth of the quarter of the year amountin
Slide 26: Strategy Updates: Consumer Banking
Strategy Updates Consumer Banking
Slide 27: Citi Business Integration: Portfolio Snapshot
Citi Business Integration: Portfolio Snapshot The acquired Citi portfolio has grown double digits since Legal Day 1 (LD1) 1,540 +12% 1,722 1,065 +30% 1,386 71.5 +40% 100.2 Aug 2022 Mar 2024 Aug 2022 Mar 2024 Aug 2022 Mar 2024 Employees Customers ('000) Loans (Php Bn) 149.9 +2% 152.4 1,018 +33% 1,353
Slide 28: Citi Business Integration: Strong portfolio growth and trajectory
Citi Business Integration: Strong portfolio growth and trajectory 4x +15% +42% Legend Aug 2022 HIGHLIGHTS 1Q 2024 ✓ Business momentum is strong; record high drivers achieved post-acquisition ✓ New customer acquisition has grown 4 times since Legal Day 1 New Customer Acquisition Cards and Loans Sales
Slide 29: Continued focus on our clients
Continued focus on our clients Net Promoter Score Aug Feb One of the most 2022 2024 most-awarded Retail 69 81 Credit Cards Banks in the country 66 72 Wealth Management 83 85 Digital Complaints 48% improvement vs LD1 57% improvement vs PY
Slide 30: Citi Integration Priorities
Citi Integration Priorities Complete migration of Citi legacy Leverage greater Aboitiz Onboard new partners to accounts into UBP systems and network to deepen our accelerate growth products relationship with our clients Continuously innovate products and Expand to new solutions to maintain our digit
Slide 31: Platform migration onto UBP systems completed in Mar 2024
Platform migration onto UBP systems completed in Mar 2024 Mar 2024: Platform Migration ✓ Improves customer experience Mar ✓ Reduces operational complexity 2024 ✓ Reduces operating expenses • Exit from TSA expenses • Lower tech delivery costs by 60% All new consumer accounts were opened in Jul ✓ Main
Slide 32: Cross-sell initiatives have commenced with successful initial results
Cross-sell inititives have commenced with successful initial results Initial Phase: Cross-sell to UBP Depositors Next Phases: Leverage Aboitiz ecosystem ✓ 13M depositor base available for cross-sell to cards, loans, and wealth products ✓ Easy 1-click opt-in process ✓ Lower acquisition costs ✓ 23+% s
Slide 33: Expansion into new partnerships and segments
Expansion into new partnerships and segments 3% unlimited rebates on S&R purchases Two New Partners Onboarded! 1% unlimited rebates on dining & shopping spend ✓ 1,500+ new distribution points Free S&R pizza for every 30,000 out-store spend ✓ 20% of new customer acquisition is from Free S&R membershi
Slide 34: New products, features and functionalities launched and more to come!
New products, features and functionalities launched and more to come! Wealth Management Credit Cards New Wealth Offerings ✓Real-time account opening ✓Free ATM withdrawals! ✓Free international funds transfers! ✓~200 UBP branches! Free Cyber Fraud Mobile Check InstaPay Insurance Deposit First Co-brand
Slide 35: Key Conclusion
Key Conclusion Platform migration from Citi successfully completed; Exit from TSA expenses Strong business momentum and trajectory Implementation of key integration priorities is bringing in desired results, continued pursuit will enhance profitability & growth The Consumer Business is driving an in
Slide 36: Thank You!
Thank You!
Union Bank of the Philippines — Q1 2024 Earnings Presentation on 6ix