Union Bank sets lofty objectives

BY RUBY ANNE M. RUBIO, BusinessWorld Senior Reporter Aboitiz-led Union Bank of the Philippines has set a goal of becoming one of the top four banks in the country by 2010, on a lookout for more opportunities after raising P5.2 billion from its stock rights offer and last year’s acquisition of International Exchange Bank (iBank). For now, the proceeds of the recent stock rights offer are enough for Union Bank to meet its business objectives, bank director Erramon I. Aboitiz told BusinessWorld. "Clearly, we have the necessary capital to be able to make [another] acquisition [like iBank]. If the opportunity comes, it is something we will consider," he said. The bank, though, has nothing on the radar screen for acquisition at the moment and is concentrating on the integration with iBank, Mr. Aboitiz said in an interview. Following the merger with iBank, the universal bank now has a network of 186 branches, 217 automated teller machines, a call center, and Internet banking. Its core businesses are cash management, retail banking, foreign exchange, capital markets, corporate and consumer finance, investment management, trust banking, and private banking. Union Bank recently sold 78.3 million shares at P59 per share, composed of 59.04 million international offer shares, 4.5 million rights offer shares, and 14.76 million domestic offer shares. Union Bank said proceeds would be used to strengthen its capital adequacy ratio in anticipation of Basel II requirements effective in July. Basel II standards seek to prevent bank failures by ensuring that financial institutions have enough capital backup to cover risks in doing business. The bank said a portion of the proceeds would be used to enhance "financial flexibility." The bank’s budgeted capital expenditure this year is P426 million. It will also use the cash for lending to small and medium enterprises aside from large corporates and infrastructure projects. Mr. Aboitiz said the integration of iBank into Union Bank would be completed in the third quarter. With the acquisition, UnionBank became the seventh-largest private bank. It will go up a notch higher after the merger of Sy-led Banco de Oro Universal Bank and Equitable PCI Bank. In its prospectus, UnionBank said the merger is in line with its "FOCUS 2010" strategic plan to become one of the leading universal banks in the Philippines by 2010. FOCUS stands for "Financial Value, Operational Excellence, Customer Franchise, UnionBank Brand/Experience and Superior Innovation." The banking industry is in a stage where loans are growing, Mr. Aboitiz said, citing more business process outsourcing (BPO) buildings being set up, more infrastructure investments, exporters requiring more credit, and opportunities in the tourism sector. "We are lending a lot more than we used to. The acquisition of iBank was a demonstration of our commitment to continue lending. It is very easy to say we will lend money since there is a lot of borrowers. But the credit discipline has to be there. Whereas we want to grow; we will be cautious in our growth, but we want to grow our loans," Mr. Aboitiz said. Union Bank boasts of providing "technologically advanced and customized products and services to cater to the specific needs" of its customers. While other commercial banks have made their presence felt overseas through remittance centers, Mr. Aboitiz said Union Bank will use its Internet banking platform, credit card, and electronic card platform in capturing inflows from overseas Filipino workers. "We have taken a different strategy as far as capturing the remittance business, whereas other banks put up the bricks-and-mortar type of facilities in other countries to attract these remittances," the bank director said. UnionBank is seeking to lead the industry in technology-based banking to distinguish itself from competitors, believing its Internet banking platform offers a strong competitive advantage. The Aboitiz-led bank allows a much wider range of banking services to be transacted via the Internet. "The bank also believes that information technology is a strategic tool of its business operations to gain a competitive advantage in client and transaction management and that its use of technology has enabled it to achieve high levels of efficiency and productivity," the bank had said. "[Union Bank] intends to continue to focus on changes in customer needs and technological advances by developing and introducing technologically advanced products and services that enable customers to achieve greater levels of operational and financial efficiencies." During the first quarter, Union Bank doubled its profits at more at P1.63 billion from P790 million in the same period last year.