Annual Stockholders' Meeting: Message of the Chairman / CEO

Message of the Chairman and Chief Executive Officer - Dr. Justo A. Ortiz
Annual Stockholders' Meeting
May 27, 2016

Journeying with Customers, Delivering Unique Experiences:

Financial Value.
- UnionBank earned a net income of Php6.0 billion in 2015, 28.4% lower than the prior year. Against the persistent volatility in trading, characterized by soft commodity prices, lumber global trade activity and erratic capital flows in 2015, we pursued our thrust on building a sustainable revenue base.
- Net interest income saw a 12.7% uptick to Php12.2 billion while total other income aggregated to Php8.0 billion, a 16.1% decline from the previous year.
- Profitability and efficiency ratios bested the Philippine Banking Industry’s return on average equity (ROE), return on average assets (ROA) and revenue-to-expense. Among the private domestic universal banks, UnionBank ranks 6th in net income, 8th in total resources, 4th in ROE, 2nd in ROA and 3rd in revenue-to-expense.
- A cash dividend of Php1.50 per share was declared, representing 26.4% of net income and resulting to a 2.6% annual dividend yield.
- 5-year Total shareholder return is at 13% per annum.
- Earnings per share, price-to-book and price-to-earnings were at Php5.68, 1.0x and 10.0x, respectively.

Operational Excellence.
- As customers become more demanding, fintechs and technologies emerged to disrupt and encroach the space traditionally dominated by financial institutions that are operating under a more stringent regulatory framework.
- UnionBank upgraded its core and internet banking systems to enable the execution of our digital banking strategy and leverage partnerships with fintechs. We equipped CitySavings’ salesforce with near-time customer acquisition statistics, branches with self-service functionality and queuing systems, and loan rangers with the capability of processing and releasing loans remotely.
- UnionBank is one of the nine pilot-volunteer banks who successfully connected with and uploaded check images to the clearing house as part of the industry-wide shift to the Check Image Clearing System.
- The Bank’s Branch Operations Management was re-certified with zero non-conformance for ISO 9001:2008 Quality Management System.
- Not to rest on our laurels, TÜV Rheinland conducted Stage 1 and 2 audits for ISO 9001: 2015 Quality Management System on our Customer Services Group, Central Processing Services and Branch Operations Management. The three operating units ended the year by successfully passing the revised standard.

Customer Franchise.
- A deep dive into customer behaviors transformed insights into products and services, and elevated transactional discussions to solution-driven engagements.
- We plotted the suite of asset and liability product offerings as well as marketing strategies suitable and customizable to the unique needs of 14 identified key customer segments.
- We adopted the Ubuntu map as a means to grow existing and form new relationships. These Ubuntu maps eventually overlapped and became self-generating ecosystems for mass acquisition.
- We launched the UnionBank Platinum MasterCard with a 1.5% cashback on all purchases -- no caps, no restrictions and no merchant categories, a first in the Philippine Banking Industry.
- UnionBank’s Trust and Investment Services Group became the first in the Philippine Trust Industry to voluntarily comply with the Asset Manager Code of Professional Conduct of the CFA Institute.
- We were touted as the Best Investor Relations Company in the Philippines at the 5th Asian Excellence Recognition Awards by Corporate Governance Asia.
- Our customer account base expanded further to 6.38 million from 5.90 million a year earlier with CitySavings’ posting 36% year-on-year growth.
- We opened the first of an exclusive network of Business Class lounges at the Alabang Country Club and capped the year with a network of 293 branches and 294 ATMs.

UnionBank Brand Experience.
- The lifeblood of the DNA -- Purpose, Values, Vision and Brand -- is the UnionBankers. Bold, smart and self-driven UnionBankers are expressing and living the DNA in their own ways.

- My career growth and development:
  --We institutionalized the Individual Development Plan and MyCareer Program with each UnionBanker clocking in an average of 23.0 training hours in 2015.
  -- We held handover rites to another set of REaCH champions who will lead their respective units towards meeting brand-aligned goals.
- My interests:
  -- Our U-Care Program organized tournaments, health and wellness fairs, culinary events, financial wellness brown bag sessions and entrepreneurial seminars.
- My advocacy:
  -- Since we started in March 2014 and with only Php4.0 Million, GoBeyond, our employee-driven corporate social responsibility initiative, positively “Made Da Diff” in the lives of close to 233 communities involving 1,686 UnionBankers and volunteers.

- All these programs contribute to Employee Engagement. We firmly belief that engaged UnionBankers
 result in engaged customers.
- We opened the engaged@UnionBank Facebook group to gather testimonials and highlight elements of employee engagement.
- We conducted a series of Engagement Workshops to identify factors and rituals to strengthen engagement.
- A step towards engaging customers driven by engaged UnionBankers is our Culture Conversations:
  -- We added three teams, integrated channels, customer centricity and sustainability to our existing teams on innovation, collaboration, sense of urgency and value-based governance. These teams represent how we will deliver unique customer experiences.
- As a testament to our commitment to our people, UnionBank was honored with seven awards at the 2016 World HRD Congress held in Mumbai, India under the following categories:
  -- Global HR Excellence, two awards - CEO of the Year, Organization with Innovative HR Practices
  -- Employer Branding Awards, three awards - Best Employer Brand of the Year, Excellence in Training, Innovation in Career Development; and
  -- Dream Companies to Work For Awards, two awards - CEO of the Year and Organization with Innovative HR Practices.

Superior Innovation.
  -- Satisfying customer demand for online, real-time and customized end-to-end solutions is a recurring theme and a tall order.
  -- Over the year, the Bank reached and served a far greater number of Filipinos by enabling payments through partnerships and innovation. We empower customers with the optionality to choose where and when to engage us.
  -- Customers can pay 150+ billers, by a mere push of a button. Joining the roster are telecommunications operators, who in turn are payers of regional, provincial and rural players. By availing of our automatic debit arrangements, smaller players can be as efficient as the bigwigs.
  -- With half of the population still without an internet connection, customers’ can still pay over-the-counter through our partnership with payment and remittance partners with over 5,000 outlets.
  -- We take an active role in ushering the unbanked into the financial sector through electronic and card-based solutions. As banks, we are the most capable to deliver on this if only we are willing.
  -- At present, about 2,700 disaster-stricken families access aid for relief and recovery efforts through our prepaid card solution.
  -- More than 500 thousand nanays now secure and payoff microfinance loans for entrepreneurial endeavors using our mobile money cash management.
  -- Our philosophy of doing well by doing good, translated into customer solutions, won us international accolades.
  -- UnionBank was honored with the Model Bank Award for Payments Innovation at the 8th Celent Awards held at the Carnegie Hall, New York.
  -- For the second consecutive year, we were lauded as Most Innovative Cash Management Service Provider at the 2015 Global Banking & Finance Review.
Corporate Philanthropy and Social Responsibility.
  -- In the spirit of pakikipagkapwa, our Corporate Philanthropy and Social Responsibility (CPSR) programs envision to connect the Bank more meaningfully with the communities we serve from both a social and business perspective.

Journeying with Customers, Continuing to be Nationally-relevant:
- Our Ureka Forum, the biggest e-commerce mass conversion program for business in the Philippines, on-boarded 128 SMEs into e-commerce in 2 days, promoting Filipino business as agents of sustainable and inclusive development.
- UnionBank invested in Ateneo de Manila University’s Areté, not just the structure but more important, the out-of-the-box curriculum that encourages creative, adaptive and multi-disciplinary thinking. Areté, the Greek word for “excellence” strongly resonates with our value of Magis.
- We also completed our donation to the University of the Philippines’ School of Economics to equip future economists with knowledge of quantitative finance and econometrics through the creation of the Center for Financial Economics.
- In May 2015, a book and exhibit entitled “Lumina Pandit II: A Continuum” was launched in partnership with the University of Santo Tomas’ Miguel de Benavides Library and University Archives.
- As a tribute to our exceptional CPSR program, the Public Relations Society of the Philippines accorded the Bank with a Gold Award in the recent 51st Anvil Awards or the Gabi ng Parangal. Likewise, our ‘Stop the Scammers’ campaign received a Silver Award for Specialized PR Program under the Issue Management or Crisis Communications subcategory.

Conclusion.
Ignited by our passion to create an emotional connection with our customers, a will to innovate and customize to the retail-level and an obsession to “Make Da Diff”, we surpassed the brutal past year. Much of what we accomplished are actually building blocks for what we now refer to as our “digital banking strategy”, the formulation of which was not a product of mere happenstance but was contemplated as early as 2000 with the launch of EON, our internet-based debit card and deposit account.

Today, we are even more capable and deliberate in executing this strategy with single-minded focus.
I am happy to report that we have turned the corner. For the first four months of 2016, UnionBank’s net income is up by 28.1% to Php2.4 billion. Edwin will report the results in more detail in his President’s Report.

We would like to thank our esteemed directors, namely, Eliza Bettina R. Antonino, former Vice-Chairman Vicente R. Ayllon, Mayo Jose B. Ongsingco and former President & COO Victor B. Valdepeñas under all of whose leadership and tutelage UnionBank flourished and achieved greater heights.

Succeeding these directors are Nina D. Aguas, Michael Victor N. Alimurung, our President & COO Edwin R. Bautista and Mona Lisa B. de la Cruz from all of whom we will seek invaluable and diverse knowledge and experience as we embrace the digital banking landscape and bring to fruition our FOCUS 2020 plans.

As we march forward to create a bank of enduring greatness, we would like to acknowledge our customers, our partners, our communities, fellow UnionBankers and Board of Directors on whose collective shoulders we stand on, knowledge we draw from, wisdom we rely on and energy we live off.

Let us once again renew our commitment to UnionBank. Our Bank. Our Future.

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1 Make sure that the website address appearing on your browser starts with https://ebanking.unionbankph.com/ and a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 You can only type in your password or PIN using the virtual keyboard.

3 Keep your device virus-free. Make sure you have an updated anti-virus software.

4 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser is Union Bank of the Philippines and has a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 You can only type in your password or PIN using the virtual keyboard.

3 Keep your device virus-free. Make sure you have an updated anti-virus software.

4 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser starts with https://ebanking.unionbankph.com and a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 You can only type in your password or PIN using the virtual keyboard.

3 Keep your device virus-free. Make sure you have an updated anti-virus software.

4 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser is Union Bank of the Philippines and has a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 You can only type in your password or PIN using the virtual keyboard.

3 Keep your device virus-free. Make sure you have an updated anti-virus software.

4 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser starts with https://ebanking.unionbankph.com and a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 Keep your device virus-free. Make sure you have an updated anti-virus software.

3 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser is Union Bank of the Philippines and has a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 Keep your device virus-free. Make sure you have an updated anti-virus software.

3 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser starts with https://ebanking.unionbankph.com and a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 Keep your device virus-free. Make sure you have an updated anti-virus software.

3 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.
1 Make sure that the website address appearing on your browser is Union Bank of the Philippines and has a padlock symbol (🔒) beside it. If you see something different or there is no address appearing, please do not proceed and report to us immediately.

2 Keep your device virus-free. Make sure you have an updated anti-virus software.

3 To secure your account, we strongly advise you to avoid downloading your banking documents using a public computer




For more information, please visit the Safe Surfing Guidelines page or call our 24-hour Customer Support at (02) 8418600.