AUB ready to restructure borrowers’ loans in ‘uncertain times’
Asia United Bank Corp. (AUB) sees a better loan portfolio this year as economic activity picks up, but noted that rising inflation could reduce borrowers’ ability to repay their obligations.
“With the improving economic environment, we expect the quality of loans to be much better in 2022 for the banking sector in general,” AUB Chairman Manuel Gomez said at a general meeting on Friday. .
Nonetheless, Gomez said the listed bank would continue to help borrowers affected by the pandemic by restructuring their loans.
“We have been successful in our efforts to restructure and adjust new terms to borrowers who may still need flexible terms as they navigate these uncertain times,” he said.
AUB Chairman Abraham Co also noted that they had “cleaned up” the bank’s balance sheet over the past two years.
At the end of March, the bank’s non-performing loan (NPL) ratio was reduced to 1.88% from 2.4% in the same period last year.
PNPs are loans outstanding for at least 90 days. The NPL ratio is the share of NPLs in the total loan portfolio.
“Now these headwinds that come from high inflation, high political risk, fiscal and monetary issues that the new government is addressing, will negatively affect asset quality,” Co explained.
“It will hurt our income statement in terms of credit losses, especially due to inflation or high interest rates,” he added.
Inflation in May rose to 5.4% from 4.1% the previous month due to higher food and transport prices. On Thursday, the Bangko Sentral ng Pilipinas raised the policy rate another 25 basis points to 2.5%.
In the first quarter, AUB saw its net income jump 79% to 1.32 billion pesos from 736.02 million pesos a year earlier, while operating profit rose 16% to reach 3.35 billion pesos. Interest income remained stable at 3.15 billion pesos.
—Tyrone Jasper C. Piad, INQ
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