Financial Adviser: 5 Things to Know About Erramon Aboitiz’s Union Bank of the Philippines in 2025 and How You Can Profit from It
UnionBank of the Philippines (PSE: UBP) has seen better days on the trading floor. Once a market favorite, the stock soared to more than P110 in 2022 at the height of optimism surrounding its digital banking push and the landmark acquisition of Citibank’s Philippine consumer business.
Today, the same stock trades just above P30, a bruising three-year decline that wiped out more than two-thirds of its value. For investors who have held on, the ride has been nothing short of punishing.
The fall in UBP’s share price mirrors the challenges it faced after the Citi deal. On paper, the acquisition looked transformative: UBP would instantly gain a sizable portfolio of credit card clients, deposit accounts, and consumer loans, along with the prestige of inheriting one of the country’s best-known retail franchises.
But the integration came at a cost. Credit cards and unsecured loans generate high yields, yet they are also vulnerable to default, especially during periods of economic stress. That reality began to show up quickly in UBP’s financials.
Provisioning for credit losses ballooned, which ate into profits and overshadowed gains from core operations. In the first half of 2025 alone, UnionBank set aside P11.55 billion for potential loan losses, compared with P8.07 billion in the same period a year earlier.
Net income dropped to just P3.25 billion, down sharply from P5.07 billion in the first half of 2024. By contrast, in 2024 the bank had managed to post P12.03 billion in full-year profit, a 31 percent jump from 2023, thanks to easing credit costs. The inconsistency has left investors questioning whether the bank’s true earnings power is being masked by the Citi portfolio hangover.
The stock’s weakness also stands out against the backdrop of the broader market. The PSEi has had a mixed performance over the past two years, struggling with inflation concerns, foreign fund outflows, and sluggish economic momentum.
Financial stocks, which typically provide stability to the index, have themselves been uneven. Some banks, like Bank of Philippine Islands (PSE: BPI) and BDO Unibank (PSE: BDO), maintained double-digit returns on equity, while others such as AUB have even expanded profitability. UBP, however, has remained an outlier: it trades at the highest price-to-earnings multiple among its peers while delivering one of the lowest returns on equity.
Yet there are signs that the worst may be behind it. After three years of relentless decline, UBP’s share price appears to be stabilizing near the P30 level. The bank continues to pay dividends, capital adequacy ratios remain above regulatory thresholds, and liquidity is strong with an LCR of over 200 percent.
More importantly, much of the provisioning pain stems from front-loaded adjustments. If these reserves have already absorbed the bulk of expected Citi-related risks, the bank may now be in a position to show what its combined franchise can truly deliver.
That raises an important question for investors: is UnionBank finally past the most painful phase of the Citi integration? And if so, what should the market expect from the stock in the years ahead as earnings stabilize and digital growth initiatives mature?
Here are the five things to know about UnionBank this year and how you can profit from it:
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1| Know how to tell if earnings weakness is temporary or permanent
UBP’s earnings slump in 2025 stems from unusually high provisioning for credit losses, not from weakness in its core business. In the first half of 2025, the bank set aside P11.55 billion in provisions, up from P8.07 billion in 1H 2024
This surge dragged net income down to P3.25 billion, compared with P5.07 billion a year earlier, even though net interest income and fee-based revenues stayed broadly stable.
The contrast with 2024 highlights how cyclical these provisions are. That year, credit costs were lower, which allowed UBP to post P12.03 billion in profit, a 31-percent increase from P9.20 billion in 2023. The difference was not explosive loan growth or new income streams, but rather the easing of provisions that freed up earnings capacity.
To see how impactful this is, consider a “normalized” scenario. In 1H 2025, UBP’s pre-provision earnings were strong enough that, if provisions had matched the prior year’s level of P8.07 billion, net income would have been around P6.7 billion instead of P3.25 billion. On an annualized basis, that translates into roughly P14 billion in profit for 2025, which is comfortably ahead of last year’s P12.03 billion.
This demonstrates that UBP’s current weakness is not structural. Its business continues to generate steady revenues, but the short-term hit from front-loaded provisions is masking its true earnings power. Once credit costs revert closer to historical averages, profits can bounce back quickly, just as they did in 2024.
2| Know how to see recovery in numbers
UBP’s 2025 slump has been defined by heavy provisioning, but history suggests this cycle may not last. If credit costs return to more normal levels, the outlook for 2026 could look much brighter.
To see why, consider the numbers step by step. In the first half of 2025, UBP reported P3.25B in net income after booking P11.55B in provisions for credit losses. Adding those provisions back shows the bank’s pre-provision earnings at P14.8B for the half year, or about P29.6B on an annualized basis.
If by 2026 provisions settle back to the P8.07 billion level recorded in 2024, deducting that amount from the P29.6 billion pre-provision run-rate would result in a potential net income of roughly P21.5 billion. This isn’t a projection of faster growth, but rather a demonstration of the earnings power that exists once credit costs revert to the 2024 norm.
Based on the bank’s pre-provision earnings power, UBP has the capacity to generate around P21 billion in net income once excess reserves are no longer weighing on results. That figure would represent more than triple the projected 2025 bottom line, which could sign one of the sharpest potential rebounds in the banking sector.
Such a recovery would also reshape profitability ratios. With equity at roughly P196 billion, a P21 billion net income would push return on equity (ROE) to about 11 percent. This would move UBP back into the mid-tier of Philippine banks, ahead of laggards like RCBC (PSE:RCB) and Security Bank (PSE: SECB), and closer to more established players such as Metrobank (PSE: MBT). While leaders like BPI and BDO still deliver 15 to 20 percent ROE, the sheer scale of UBP’s rebound would be enough to attract investor attention.
For a stock that currently trades at just 0.51x book value, the market does not appear to be pricing in this kind of earnings recovery. If the bank can deliver even a portion of this improvement in 2026, it would strengthen the case for a re-rating, as investors begin to reassess UBP not as a weak-return outlier but as a bank capable of sustainable double-digit returns.
3| Know how to use pricing multiples to spot bargains
At today’s price of about P30, UBP trades at only 0.51x book value, meaning the stock is valued at barely half of its net assets. Such discounts are normally reserved for banks under distress, yet UBP is far from distressed because it remains liquid, well-capitalized, and continues to pay dividends. This disconnect between fundamentals and valuation makes the stock stand out as a deep value candidate.
If profitability rebounds and return on equity (ROE) climbs back to the 11 percent range, the market is likely to re-rate UBP closer to peers. A conservative recovery would put the stock at around 0.8x book value, similar to MBT, which translates to a price near P47 per share.
A stronger alignment with mid-tier banks that trade closer to 1.0x book value would lift the stock to roughly P59 per share. And if UBP proves it can sustain ROE above 12 percent and convinces investors it belongs in the same category as the strongest peers, a valuation of 1.2x book value, comparable to BPI or BDO, would imply a price of more than P70 per share.
The story looks even more compelling when viewed through earnings multiples. At the depressed 2025 run-rate, UBP is trading at about 11x P/E, the highest in the sector. But if net income normalizes to around P21 billion in 2026, the forward P/E would fall sharply to just 6x. That would make UBP cheaper than most peers despite already being priced at a premium to book.
For context, BPI currently trades around 1.3x book with 15 to 16 percent ROE, while BDO trades near 1.2x book with 14 to 15 percent ROE. UBP does not need to match those leaders to justify a higher valuation.
Even a modest re-rating from 0.51x to 0.8x book value would already deliver more than 50 percent upside, while simply aligning with average peers could double the stock from current levels. When combined with a forward earnings multiple that looks cheaper than the rest of the sector, the case for UBP as a deep value opportunity becomes even stronger.
4| Know how to find value in the long-term
UBP stands apart from many of its peers because of its early and aggressive bet on digital banking. The acquisition of Citibank’s Philippine retail portfolio instantly gave it scale in high-yield consumer finance, particularly in credit cards and personal loans.
At the same time, its launch of UnionDigital Bank, its open API-driven services, and fintech partnerships cemented its reputation as one of the country’s most technology-forward lenders.
In the short-term, this digital strategy has front-loaded costs in the form of higher provisioning and integration expenses. But in the medium to long term, it creates the foundation for recurring, higher-margin income streams.
Consumer lending and credit cards generate higher yields than traditional corporate lending, while digital platforms allow for more efficient customer acquisition and lower servicing costs. Over time, these strengths can evolve into a competitive moat, a sustainable advantage that makes UBP more resilient against traditional banks that are slower to digitize.
To frame UBP’s long-term value, we use a Buffettology-style approach. We start with today’s depressed base of about P6.5 billion in 2025 earnings and P59 book value per share. From there, we assume steady growth in earnings and book value as UBP leverages its digital moat such as UnionDigital Bank, the Citi retail portfolio, API-driven services, and fintech partnerships.
For the growth rate, we used 10 percent annually as a conservative starting point, reflecting historical loan and fee income growth in Philippine banks plus the incremental boost from digital.
But given UBP’s unique positioning in consumer finance and digital banking, which are segments that historically expand faster than traditional corporate lending, a 12 to 13 percent growth assumption may be more reasonable.
This better reflects the bank’s potential to compound book value through higher-yield assets and lower operating costs from digital channels.
For the discount rate, we base it on the 10-year Philippine government bond yield of 6.075 percent plus a conservative five percent equity risk premium, giving a hurdle rate of 11.075 percent. This ensures we are not overstating the present value, even under optimistic conditions
Running the numbers shows just how much long-term compounding can matter. If UBP grows book value at a conservative 10 percent annually, today’s book value of P59 per share would rise to about P153 by Year 10.
Applying a cautious 0.8× price-to-book multiple values the stock at roughly P122 per share in the future, which, when discounted back at 11.075 percent, translates to a present value of about P43 per share.
If growth accelerates to 12 percent annually, book value climbs closer to P185 per share, supporting a future value of around P148 and a present value estimate of P52 per share.
At an even faster 13 percent annual growth rate, book value could reach P210 per share over the decade, implying a future value of P168 and a discounted present value of P59 per share.
Even at a conservative 10 percent growth rate, UBP looks undervalued relative to today’s P30 price, trading at a discount of nearly 30 percent. If digital initiatives allow earnings to compound faster, closer to 12 to 13 percent annually, the intrinsic value could realistically fall in the P50 to P60 range today, which shows just how much upside exists once provisions normalize and digital momentum takes hold.
5| Know how to gauge the next move in the stock price
From a technical perspective, UBP’s long-term chart tells a compelling story. The surge from 2020 to its 2022 peak above P110 resembles a classic five-wave impulsive rally, which marked the end of a major bull run.
What followed from 2022 through 2025 appears to be a large corrective structure that fits the profile of an A-B-C decline. The first leg, Wave A, was the sharp selloff in 2022 immediately after the peak.
Wave B was the brief rebound in late 2022 into early 2023, while Wave C has been the persistent downtrend from 2023 to today, driving the stock into the P30 range.
Because Wave C often mirrors Wave A in size and duration, the current levels may represent the final stages of this correction. If so, UBP could be close to forming a bottom, which set the stage for a new impulsive cycle upward over the next 12 to 24 months.
If we look at this from a price–time geometry, the last major rally lasted about two years (2020–2022), and the decline has now stretched into its third year, which aligns with our observation that markets often turn every three to five years.
This timing suggests that 2025 is a natural candidate for a cyclical low, especially since the stock has already retraced more than 70 percent of its prior advance and is now testing the strong support zone between P28 and P30.
If this level holds, it would confirm the possibility that the correction is nearing completion. Should the market fail to reverse in 2025, the next major time window would fall around 2027, which is the fifth year from the 2022 peak.
But with the convergence of time, which is three-year cycle, price retracement, and pattern of wave c, the higher probability is that the turning point should materialize sometime in 2025, most probably in later part of the year.
