ASIA UNITED Bank Corp. (AUB) is looking to grow its trust business’ assets under management (AUM) by 20% to P32 billion amid improving investor confidence due to better economic prospects, it said in a statement on Wednesday.
The bank’s growth target, if realized, will be faster than the 12% increase in its AUMs in 2020 to P26.4 billion.
“The looser monetary policy of the Bangko Sentral ng Pilipinas (BSP) enabled AUB to generate returns higher than deposit rates through investments,” AUB said.
AUB Senior Vice-President and Head of Trust Andrew A. Chua said more clients parked their excess cash in unit investment trust funds last year after the BSP cut benchmark interest rates to record lows.
For this year, Mr. Chua expects investors to continue opting for fixed-income assets for a stable flow of income. However, returns from these investments may be small as inflation remains elevated while the BSP has also kept borrowing costs steady, making real interest rates negative.
Inflation stood at 4.5% for the third straight month in May, above the BSP’s 2-4% target but slower than the 4.7% in February.
“Since inflation is expected to hover at the 4% level, this means you would need to invest in an asset that would generate over 5% gross. Looking at the 10-year fixed-income treasury notes now (which stand below 4%), this is hardly possible,” Mr. Chua said.
He said investors are recommended to keep a mixed portfolio of both fixed-income assets and equities to maximize their funds.
“Despite the volatile nature of equities, we still believe that over the medium- to long-term horizon, they will still provide growth ranging from 8-10%. Mixing this with fixed income will definitely enhance and protect investors from inflation,” Mr. Chua said.
AUB last week said it targets to grow its net earnings by 30% to P4 billion this year from P3 billion in 2020. The bank is optimistic that improving consumer confidence will boost its lending business.
The bank’s net income dropped by 38% to P736 million in the first quarter from a year earlier due to higher loan loss provisions.
AUB’s shares closed at P46.10 apiece on Wednesday, down by five centavos or 0.11% from its previous finish. — L.W.T. Noble