Union Digital Bank (UDB), the digital banking arm of Union Bank of the Philippines, expects to make money finally in 2026 as it recovers from earlier losses and improves its loan quality.
UDB president and CEO Danilo J. Mojica II said the bank has fixed two major problems that weighed on performance — high bad loans and low consumer awareness — and is now entering a growth phase. While the bank is not yet profitable, Mojica said losses next year are expected to be significantly lower than in the past.
The bank may still post a loss of several hundred million pesos this year, down sharply from around P3 billion in losses last year.
UDB’s non-performing loan (NPL) ratio is expected to fall to about 6 percent by year-end, a major improvement from a peak of around 40 percent. The NPL ratio stood at 22.86 percent last year and has dropped to about 7 percent as of December after the bank reduced its loan portfolio to P7 billion from P9 billion to P11 billion previously.
Mojica said the bank intentionally cut back lending to remove borrowers who failed to pay their debts. As a result, the bank’s loan loss coverage has improved to more than 100 percent, compared with 60 percent to 70 percent previously.
The bank plans to grow its loan book back to around P9 billion in the coming years, focusing only on higher-quality borrowers.
UDB has also been working to improve brand recognition. Mojica said the bank was previously poorly recognized by consumers, but marketing efforts have increased awareness, with more than 8 percent of consumers now able to correctly identify and understand the Union Digital brand.
Union Digital Bank began operations on July 18, 2022, after receiving approval from the Bangko Sentral ng Pilipinas, and is one of six digital banks operating in the country.
