On Monday, UnionBank of the Philippines chief financial officer Manuel R. Lozano said the industry is once again leaning on those lessons amid the US-Iran war.
“In many ways, banks actually can adopt the same strategies that were implemented during the COVID-19 pandemic,” Lozano said during a media briefing after the annual meeting of parent firm Aboitiz Equity Ventures Inc.
“The focus shifts from aggressive to cautious growth, preserving capital, managing liquidity, ensuring that your resiliency is at a high level, and of course being selective in your lending,” he added.
Unionbank proactive in implementing stricter lending
The Aboitiz family-led banking giant is taking a more conservative approach to lending even with a much larger consumer profile after acquiring key assets of Citi Philippines three years ago.
Lozano said this started early last year while further tightening was implemented after “the Iran conflict was sparked.”
“We have reviewed our exposure to sectors that may be affected and have proactively tightened our credit standards where needed,” he explained.
Liquidity support stays intact
But this is balanced with ensuring sufficient resources for clients and borrowers so business can continue to grow.
“We saw this in the pandemic: banks need to be ready to support their customers, particularly if the clients require access to cash or funding during this period,” Lozano said.
“We’re also managing our operating expenses more closely and implementing practical measures such as energy optimization and flexible work arrangements while ensuring that we continue to support both our employees and our customers during these difficult times,” he added.
Capital buffers hold
The country’s lenders have emerged from past shocks in a stronger position, with UnionBank and other top banks maintaining solid financial buffers.
“While the environment has become much more uncertain, especially on interest rates, banks in the Philippines remain quite well capitalized. So that’s key. Key is to give confidence, ensure that our shareholders, depositors, regulators all know that the Philippine banks are ready to address and to manage these volatilities,” Lozano said.
Earnings stronger, risks remain
UnionBank booked a strong first quarter as net income surged to P3.8 billion, up 167 percent year-on-year, on strong momentum after last year’s balance sheet reset.
Earnings are stronger as credit costs fell to P4.5 billion and core revenues grew, but risks tied to the Iran conflict remain elevated given its impact on inflation and consumer demand that would eventually impact the broader economy.
