{"id":325915,"date":"2023-12-02T23:56:04","date_gmt":"2023-12-02T15:56:04","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=325915"},"modified":"2023-12-02T23:56:06","modified_gmt":"2023-12-02T15:56:06","slug":"stock-in-focus-unionbank-of-the-philippines-ubp-2-dec-2023-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-unionbank-of-the-philippines-ubp-2-dec-2023-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Unionbank of the Philippines (UBP) – 2 Dec 2023 by RCBC Securities"},"content":{"rendered":"\n

Summary of Broker’s Recommendation<\/h2>\n\n\n\n
Stock Code<\/strong><\/td>UBP<\/td><\/tr>
Company Name<\/strong><\/td>Unionbank of the Philippines<\/td><\/tr>
Broker<\/strong><\/td>RCBC Securities<\/td><\/tr>
Opinion Issued on<\/strong><\/td>2 Dec 2023<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 71.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
<\/div>\n\n\n\n

We cut our Target Price (TP) for UBP by 7% from Php76.00 to Php71.00 as we reduced our 2023 earnings and Book Value estimates to incorporate the 9-month (9M) 2023 results. Nonetheless, we are upgrading our stance from HOLD to BUY as we turn positive on UBP beyond 2023 when an annual loan growth of 15% is likely to be sustained.<\/p>\n\n\n\n

Furthermore, its share price fell by 16% in only three months, wildly reacting to its exclusion from the PSEi composition. The sharp fall in UBP\u2019s share price has also made it undervalued relative to our revised PBR-based target price (TP) of Php71.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Analysis and Opinion<\/h2>\n\n\n\n

Earnings Recap<\/h3>\n\n\n\n

UBP\u2019s 9M 2023 net income dropped 19% year-on-year (y\/y) to Php8.1 billion. Net interest income climbed 34% to Php37.3 billion due to the 18% increase in its loan portfolio. Net Interest Margin (NIM) expanded by 57bps y\/y to 5.3%. Non-interest income soared 93% to Php33.5 billion from the full-year impact of UnionDigital and the acquisition of the Citi consumer business. Operating expenses (opex) jumped 63% to Php33.5 billion also due to the Citi consumer business acquisition.<\/p>\n\n\n\n

Continued increase in provisions<\/h3>\n\n\n\n

In 9M 2023, provisions soared 300% y\/y to Php9.3 billion. In the 3rd quarter (3Q) 2023 alone, UBP\u2019s provisions rose by 460% y\/y and 53% q\/q to Php4.4 billion, which continued to be dragged by higher rates and inflation. Asset quality, as a result, further weakened with its 3Q 2023 NPL ratio increasing by 50bps q\/q to 5.5%.<\/p>\n\n\n\n

Forecast cut<\/h3>\n\n\n\n

We downgraded our 2023 net income forecast by 17% as we lowered our net interest income estimate by 5% on higher interest expenses. We also raised our 2023 provisions estimate by 47% but reduced our opex forecast by 4%.<\/p>\n\n\n\n

Longer term prospects<\/h3>\n\n\n\n

Despite the lower profitability y\/y this 2023, we expect UBP to recover with
2024\/2025 net income forecasted to grow by 33%\/24% after it fully integrates its Citi consumer business, which is just expected to incur Php1.4 billion in expenses in 2024. We note that in 9M23, Php3.6bn out of the bank\u2019s total opex came from the acquisition. <\/p>\n\n\n\n

We believe that UBP can sustain a double-digit loan growth of 15% through its drive for expansion, reaping the benefits of its acquisition of Citi consumer business. Furthermore, we see UBP also counting on its digital bank, UnionDigital, which is envisioned to double its current loan portfolio of Php12 billion by 2024.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Check how many brokers recommend this stock<\/h2>\n\n\n\n
\n
All Stock Rankings<\/a><\/blockquote>