{"id":327966,"date":"2024-05-17T09:37:15","date_gmt":"2024-05-17T01:37:15","guid":{"rendered":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/?p=327966"},"modified":"2024-05-17T11:37:25","modified_gmt":"2024-05-17T03:37:25","slug":"stock-in-focus-unionbank-of-the-philippines-ubp-17-may-2024-by-regina-capital-development-corp","status":"publish","type":"post","link":"https:\/\/www.pinoyinvestor.com\/smartinvestor\/stock-in-focus-unionbank-of-the-philippines-ubp-17-may-2024-by-regina-capital-development-corp\/","title":{"rendered":"Stock in Focus: Unionbank of the Philippines (UBP) – 17 May 2024 by Regina Capital Development Corp."},"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>Regina Capital Development Corp.<\/td><\/tr>
Opinion Issued on<\/strong><\/td>17 May 2024<\/td><\/tr>
Recommendation<\/strong><\/td>Buy<\/td><\/tr>
1-Year Target Price<\/strong><\/td>PHP 58.80<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n
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Considering the integration costs and operational challenges faced by UBP in the short term, which may impact its profitability, we have revised our Target Price to P58.80, while the Buy rating is retained.<\/p>\n\n\n\n

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

Profitability tempered by integration cost<\/h3>\n\n\n\n

Union Bank of the Philippines (UBP) managed to perform well in line with expectations in 1Q 2024, with a +14% year-on-year (y\/y) increase in topline revenues. This growth is largely fueled by the expansion of consumer loans, higher NIMs, and increased transaction fees. NII surged by +17% y\/y to P13 billion, driven by a significant improvement in NIM, now standing at 5.7%. Non-interest income, excluding trading gains, also saw a healthy +13% y\/y increase to P4.7 billion. UBP’s consumer loans now represent 59% of its total loan portfolio, nearly three times higher than the industry average. Despite incurring a one-time integration cost of P1.1 billion related to the migration of acquired Citi Consumer business into UBP systems, the bank still managed to post a Net Income of P2 billion (-41% y\/y) for the quarter.<\/p>\n\n\n\n

Opex rose by +10% y\/y to P11 billion, mainly due to IT-related costs associated with the migration of Citi retail accounts into UBP systems. The bank’s marketing investments, however, led to a significant increase in new-to-bank credit card customers, doubling last year’s customer acquisition rate. With total assets reaching P1.1 trillion and total loans at P521 billion, UBP maintains a strong financial position. Low-cost CASA deposits stood at P431 billion, providing a stable funding base.<\/p>\n\n\n\n

Despite an increase in NPL by +80bps q\/q to 7.1% in 1Q24, the NPL cover also rose to 57% from 55% in 4Q23. To strengthen its capital base, UBP has approved a SRO amounting to P10 billion, with an offer price of Php30.57\/share. The entitlement ratio is set at 1 Rights Share for every 9.1382 Shares Owned, with 327,118,089 shares to be offered. The SRO is scheduled to be completed by the 2Q 2024, with the listing date tentatively set for May 31, 2024.<\/p>\n\n\n\n

Looking ahead, UBP anticipates a reduction in expenses starting April onwards, with sufficient capital to support the growth of its high-yielding consumer business segment. Expectations are optimistic regarding the bank’s capital adequacy, profitability, and asset quality, particularly with the successful completion of the Citi migration and the upcoming SRO.<\/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>