AUB’s Growth Story: Strong Numbers, Subtle Cracks

Asia United Bank (AUB) closed the third quarter of 2025 with a headline that would make any banker proud: ₱9.37 billion in nine-month net income, up 9% year-on-year, and a balance sheet that swelled to ₱417 billion. Loans surged 29%, deposits climbed 19%, and capital ratios remain comfortably above Basel III floors. On paper, it’s a picture of resilience and ambition.

But beneath the glossy numbers, there are pressure points investors and industry watchers should not ignore.

Margins under strain. AUB’s net interest margin slipped to 5.0% from 5.3% a year ago. Why? Deposit costs jumped 35%, while yields on securities fell 12%. With the Bangko Sentral ng Pilipinas cutting reserve requirements earlier this year, liquidity is abundant, competition is fierce, and repricing gaps are widening. For a bank that thrives on spread income, this is a structural headwind.

Trading gains: friend or fickle? Non-interest income helped cushion the margin squeeze, rising 18% for the nine-month period. Yet the third quarter told a different story: other operating income fell 9%, dragged by weaker forex and miscellaneous gains. When markets turn, these buffers vanish quickly.

Loan growth vs. credit risk. AUB’s loan book ballooned to ₱256.9 billion, but provisions—though up 141%—still look light against system averages. Non-performing loans are impressively low at 0.36%, far below the industry’s 3.3%, but rapid growth often tests underwriting discipline. A normalization in credit costs could dent future earnings.

Funding mix: a double-edged sword. Demand deposits soared 26%, while savings and time deposits shrank. This tilt toward transactional balances keeps funding cheap, but it also makes liquidity more sensitive to corporate flows and competitive pull from e-wallet giants like GCash and Maya. AUB’s own HelloMoney wallet is scaling, yet the digital battlefield is crowded and unforgiving.

Capital and liquidity cushions remain strong, with CAR at 19.5% and liquid assets at 36% of total assets. Still, the trend shows a shift toward longer-duration assets, exposing the bank to interest-rate volatility—a risk already visible in its ₱1 billion unrealized loss on FVOCI securities.

The bigger picture? AUB is executing well: growing loans, defending CASA, and pushing digital partnerships. But the narrative for 2026 will hinge on three things: protecting margins in a low-rate, high-liquidity environment; converting HelloMoney into a daily-use ecosystem to fend off fintech giants; and keeping credit discipline tight as growth accelerates.

For now, AUB remains a solid performer—but in banking, strength today can mask fragility tomorrow. Investors would do well to watch the cracks before they widen.

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