UnionBank sees double-digit growth in 2019 amid interest rate, RRR cuts

Aboitiz-led Union Bank of the Philippines is seeing a double-digit growth for its bottom line this year as the recent move by monetary authorities to reduce interest rates and banks' reserve requirement will increase liquidity in the financial system.

At a press briefing after the bank's annual stockholders' meeting in Pasig City on Friday, UnionBank president Edwin Bautista said he is confident the bank will achieve a double-digit growth this year despite booking a 13% decline in earnings last year amid margin pressures from higher interest rates.

"Double-digit growth will be driven by better loan margins," Bautista said.

This as the Bangko Sentral ng Pilipinas (BSP) recently decided to cut key policy rates by 25 basis points, with its its inflation outlook "manageable" over the policy horizon. 

The central bank also announced the reduction in large banks' reserve requirement ratio (RRR)- the amount of cash a bank must hold in its reserves against deposits made by customers of the Philippines - by 200 basis points to 16%. 

With the latest monetary actions, Bautista said this will increase liquidity in the market which will be positive for the banking sector.

Last year, UnionBank saw its consolidated net income decline by 13% to P7.3 billion from P8.4 billion on the back of compression of loan margins due to higher interest rates in 2018, when inflation spiked to a nine-year high. — RSJ, GMA News