{"id":326587,"date":"2024-02-02T00:06:23","date_gmt":"2024-02-01T16:06:23","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=326587"},"modified":"2024-02-02T00:06:24","modified_gmt":"2024-02-01T16:06:24","slug":"stock-in-focus-unionbank-of-the-philippines-ubp-2-feb-2024-by-rcbc-securities","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-unionbank-of-the-philippines-ubp-2-feb-2024-by-rcbc-securities\/","title":{"rendered":"Stock in Focus: Unionbank of the Philippines (UBP) – 2 Feb 2024 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 Feb 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 51.00<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Following UBP\u2019s earnings miss and our forecasts downgrade, our target price (TP) is now lower at Php51.00 but we retain our BUY rating, as its share price has been heavily battered to start the year (11.2% down year-to-date). Our TP implies a 14.1% upside and 2024 dividend yield of 3.5%. However, we think that UBP still faces risks of further earnings drag this year due to looming provisions with interest rate cuts to take place by the 2nd half (2H) 2024. Furthermore, UBP has the lowest ROE among the banks in our coverage, while asset quality remains an issue.<\/p>\n\n\n\n

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

Earnings miss<\/h3>\n\n\n\n

Union Bank of the Philippines (UBP) reported 2023 net income of Php9.2 billion, 27.6% down year-on-year (y\/y). This fell below consensus and our own estimates, accounting for 84%\/88%. Net interest income climbed 34% y\/y to Php52 billion, accounting for 107% of our forecasts. Net interest margin (NIM) expanded by 70bps y\/y to 5.5%, primarily attributed to consumer loans increasing to 58% of UBP\u2019s total loan portfolio. Non-interest income was in line with our estimates, rising by 41% y\/y to Php19.0bn. On the other hand, operating expenses soared by 43%, led by the Citi Consumer acquisition. Provisions are yet to be disclosed, but we think it may follow its q\/q trend similar in 3Q 2023, as NPL ratio increased by 50bps to 5.5%.<\/p>\n\n\n\n

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

We downgraded our 2024\/2025 net income forecasts by 10%\/14% to Php 12.4 billion\/Php 14.7 billion. Our net interest income projection for 2024 was raised by 3% as we still expect some loan repricing, benefitting from the off-cycle rate hike last October, while maintaining our loan growth assumption of 15%. On the other hand, we trimmed our 2025 net interest income estimate by 1% due to the expected rate cuts by 2H 2024. We expect that FY24F\/FY25F non-interest income will grow by 6%\/7% to Php27.8 billion\/Php36.0 billion from its growing UnionDigital business. We raised our 2024\/2025 provisions by 10% with asset quality remaining to be an issue.<\/p>\n\n\n\n

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