BIZ BUZZ: UnionBank-Citi honeymoon “better than expected”
Two years since taking over Citibank Philippines’ consumer and retail banking businesses — for which a P45-billion premium was paid — incoming Union Bank of the Philippines CEO Ana Maria Aboitiz-Delgado is happy with how the proverbial knot has been tied.
To recall, the P72-billion acquisition was expected to speed up UnionBank’s penetration of the upscale consumer market by five to 10 years and boost its long-term income stream.
“It’s performing much better than our models told us it would. We’re growing and acquiring close to over 50,000 cards a month. Our models projected much less than that. The spend on the cards is also growing,” Delgado said in a recent forum organized by the Shareholders Association of the Philippines.
“We have other assumptions I’m not at liberty to share here that relate to the premium we made on the model. But they are performing as planned,” she said, responding to a query from retired China Banker Alex Escucha.
Delgado, who will take the helm on Jan. 1 next year, reckoned that the challenge for her would be to use the UnionBank platform, comprising three banks (UnionBank parent, UnionDigital and City Savings Bank) and one fintech arm (UBX) to serve the Philippine market.
“All of them are carefully designed to address one segment of the market, or separate segments, so there’s no overlap in our strategy,” Delgado explained.
From a treasury-led aka ‘hedge fund’ model of old, UnionBank is now a truly commercial and consumer banking-driven lender. About 59 percent of loan book as of end-June comprised consumer loans.
“The Citi acquisition is very much our story and our road to market for the wealth and mass wealth segments, regardless of the products that we use to acquire and engage them with,” she said.
She added that Citi Savings, she noted this is close to her heart, will continue to address the needs of the mass market, particularly local bayani (heroes) like public school teachers and uniformed personnel. UnionDigital is further seen to scale their reach into the mass market.
But embracing the high-margin consumer lending has tradeoffs. It jacked up UnionBank’s credit provisioning by 80 percent year-on-year to P9 billion in the first half (including additional loss reserves for UnionDigital), gnawing on the bottom line (down 17 percent to P5.1 billion). By the second quarter, however, profit rebounded by 20 percent to P3.06 billion. The bank has room to catch up for the rest of the year.
“The task ahead for me is to tie that up together and to help our leaders press on the gas, to accelerate the growth that we’ve seen over the last four years and take it to the next level,” she said.
