Union Bank of the Philippines said Friday its net income in 2023 dropped to P9.2 billion from P12.7 billion in 2022, hurt by the cost of integrating the recently acquired consumer business of Citi.
Union Bank said net revenue surged 36 percent to P71 billion due mainly to higher net interest and non-interest income. Net interest margin went up 5.5 percent last year from 4.8 percent in 2022 due to higher consumer loans, pushing net interest income 34 percent higher to P52 billion.
Non-interest income was up 41 percent to P19 billion, with fee-based income higher by 54 percent to P10 billion. The growth in fees was a result of the growing customer transactions such as bills payments, funds transfers, interchange, and other card-related fees.
Operating expenses were up 43 percent to P45 billion on account of the full-year impact of the acquired Citi consumer business and UnionDigital. These new businesses were only included as part of the banking group in the second half of 2022.
Union Bank incurred one-time costs due to the integration of the acquired Citi consumer business. Total assets as of December 2023 amounted to P1.1 trillion, reflecting a 5 percent increase from December 2022.
Net loans and receivables grew by 10 percent reaching P527 billion, while total deposits remained stable at P713 billion.
“We have surpassed our customer growth targets. Our customer base is now close to 14 million. The strategic shift towards a more predictable, recurring income model has proven successful, reflected in our above-industry net interest margins and fees as a proportion of our balance sheet size,” said Manuel Lozano, UnionBank chief financial officer.
Lozano said, however, that profitability was undermined by front-loaded costs incurred in the integration of new businesses. “In a way, we are temporarily carrying the cost of running on two systems – we are paying Citi a fee to support the business on their platform while we develop and fully transition all ex-Citi retail customers to our own system. These investments are necessary to ensure the sustainability of our consumer business growth moving forward,” he said.
UnionBank president and chief executive officer Edwin Bautista said investments in new business such as Citi consumer business which basically issues credit cards and UnionDigital are yielding highly promising results.
“We are experiencing early returns on these strategic investments, with leading indicators pointing towards a sustained increase in transactions over time. This is evidenced by a growing individual depositor base, an uptick in new-to-bank credit cards, record-breaking downloads of our mobile app, and net promoter scores that surpass industry standards. Our commitment extends to completing the seamless integration of these new businesses this year. Immediately after, you will see a stronger and more profitable UnionBank,” he said.
