UnionBank shares rise on earnings report, PSEi re-entry

SHARES in Union Bank of the Philippines (UnionBank) rose last week when the Aboitizled bank reported its full-year earnings and ahead of its return to the Philippine Stock Exchange index (PSEi) after 14 years.

Data from the PSE showed UnionBank ranked second in value turnover with P4.08 billion worth of 42.31 million shares changing hands from Jan. 30 to Feb. 3.

The Aboitiz-led bank shares finished at P96 apiece on Friday, inching up by 2.7% from its P93.50 close last Jan. 27. For the year, the stock has risen by 11.5%.

Rastine Mackie D. Mercado, research director at China Bank Securities Corp., said UnionBank’s price movement was mainly driven by its impending inclusion in the main index.

“While many anticipated [UnionBank]’s inclusion, the formal announcement was made after the market close last [Jan. 27], hence funds/ investors had to work to rebalance their portfolios by [last] week,” Mr. Mercado said in an e-mail.

He added that the bank’s fourth-quarter performance was stronger on an annual basis although its “bottomline performance was relatively flat despite the strong growth in revenues (as driven by its acquisition of Citi’s consumer business effective August 2022).”

In a press release last week, UnionBank said its net income reached P12.7 billion last year, or nearly flat from the P12.578-billion net profit in 2021. Its revenues rose by 16% to P52.2 billion from P45.1 billion in the same period in 2021.

Revenues mainly came from net interest income and fee-based income, which compensated for the absence of trading gains, the bank said.

The listed bank’s acquisition of the consumer banking business of Citigroup, Inc. in the Philippines was completed in August last year. It was valued at P55 billion.

The takeover covers Citi’s local credit card, unsecured lending, deposit, and investment businesses, as well as Citicorp Financial Services and Insurance Brokerage Philippines, Inc.

Meanwhile, the PSE said in a statement last week that DMCI Holdings, Inc. and UnionBank will be replacing Megaworld Corp. and Robinsons Land Corp. in the PSEi beginning Feb. 6.

The move comes after the bourse operator’s index review for 2022. To be included in PSEi means a listed company must be among the top in terms of liquidity and market capitalization.

Companies considered for inclusion also need a free float level of at least 20% of their outstanding shares. Relevant financial criteria as well as eligibility for early inclusion are also considered by the PSE in the index review, PSE said.

“We think market reception to the earnings news was lukewarm as investors monitor the ongoing impact of the Citi consumer business acquisition to financial performance,” Mr. Mercado said.

“Revenues saw strong growth, but operating expenses grew at a steeper pace [which is] likely in relation to the acquisition, so how that dynamic change is something that investors will monitor moving forward,” he added.

Traders and investors should consider UnionBank given its improving visibility on the acquisition’s impact on its financials, Mr. Mercado said.

“Investors will likely monitor continued growth in net interest income, net interest margins, and nonperforming loans, considering the higher proportion of consumer loans to its total book, and impact of the Bangko Sentral ng Pilipinas’ cumulative rate hikes.”

Mr. Mercado pegged support and resistance levels at P91.80 and P100.00, respectively. —