PH_UBP: quarterly profit up 69.3%, but the entire gain came from a low base, not from the business

On 25 August PH_UBP released its second-quarter 2026 results. Net profit for the reported period rose 69.3% year on year to PHP 3,078.3m, while net interest income added only 1.0% year on year to PHP 25,602.6m. Trailing-twelve-month profit reached PHP 13,662.0m, giving a P/E of 5.3 and an ROE of 6.0%. At the current price the stock looks rather attractive: the multiple sits below its own history, the 4.4% dividend yield exceeds the key rate, and the portal model implies 16% upside to fair value.

Key takeaways

— The 69.3% year-on-year profit increase is a low-base effect from last year, not an acceleration of the business

— Net interest income added only 1.0% year on year to PHP 25,602.6m – business growth has stalled

— Quarterly operating profit of PHP 4,202.8m against net profit of PHP 3,078.3m – the gap between operating and net result is narrow

— P/E of 5.3 with ROE of 6.0% – the market values the bank below book, making the 4.4% dividend yield more attractive

— The 4.4% dividend yield exceeds the key rate, but the payout rests on profit that reached PHP 13,662.0m over the last twelve months

— The portal model estimates 16% upside to fair value – this is our own calculation, not a market consensus

Attractiveness

Key figures, PHP bn

The 69.3% year-on-year profit increase is a low-base effect from last year, not an acceleration of the business

PH_UBP's net profit for the second quarter of 2026 was PHP 3,078.3m, up 69.3% from a year earlier. However, this growth is explained not by an improvement in the business but by a low base: in the second quarter of 2025, profit was only PHP 1,818.0m. Compared with the first quarter of 2026, when profit reached PHP 3,833.3m, the second-quarter result was 19.7% lower.

The main source of income – net interest income – barely grew: PHP 25,602.6m versus PHP 25,358.3m a year earlier, an increase of just 1.0%. This means that profit growth was not supported by growth in the core business. Most likely, the improvement came from cost cuts or one-off factors, but the provided data does not confirm specific causes.

For an investor, this is an important signal: the sustainability of profit is in question if it is not backed by growth in interest income. In the next report, one should watch the dynamics of net interest income – if it continues to stagnate, profit may return to more modest levels.

Net interest income added only 1.0% year on year to PHP 25,602.6m – business growth has stalled

Net interest income in the second quarter of 2026 was PHP 25,602.6m, only 1.0% above the second quarter of 2025 (PHP 25,358.3m). This is a sharp deceleration compared with the first quarter of 2026, when the figure reached PHP 16,762.7m, and with the first quarter of 2025 (PHP 15,389.7m). However, comparison with the first quarter is incorrect due to different period lengths, but year on year growth is virtually absent.

This dynamic suggests that the bank is not increasing interest income, possibly due to margin pressure or weak loan portfolio growth. In a high key-rate environment, this is particularly alarming: if the bank cannot increase interest income, its ability to generate profit is limited.

For an investor, this means that the main driver of profit has stopped working. Without growth in net interest income, further profit increases are unlikely unless there is a significant cost reduction or one-off income.

Quarterly operating profit of PHP 4,202.8m against net profit of PHP 3,078.3m – the gap between operating and net result is narrow

PH_UBP's operating profit in the second quarter of 2026 was PHP 4,202.8m, while net profit was PHP 3,078.3m. The difference between them – PHP 1,124.5m – is taxes and other non-operating items. Such a small gap indicates that the tax burden and other expenses do not consume a significant portion of the operating result.

For a bank, this is a normal situation, but it is important that operating profit also shows no growth: a year earlier it was PHP 2,406.1m, i.e. it grew by 74.7%. However, this growth, as with net profit, is due to the low base of the previous year, not to improved operating efficiency.

It is worth noting that in the first quarter of 2026, operating profit was PHP 4,752.2m, which is higher than in the second quarter. This confirms that the second quarter was weaker than the first, and the sustainability of profit is questionable.

P/E of 5.3 with ROE of 6.0% – the market values the bank below book, making the 4.4% dividend yield more attractive

The P/E multiple on trailing-twelve-month earnings is 5.3, and return on equity (ROE) is 6.0%. This means the market values the bank below its book value: with an ROE of 6.0%, a fair P/E could be higher if the market expected growth. The current valuation implies either stagnation or risks that the market prices in.

The trailing-twelve-month dividend yield is 4.4%, which is above the key rate. This makes the stock attractive for income-oriented investors. However, the sustainability of the dividend depends on the bank's ability to generate profit, and, as we have seen, growth in net interest income has stalled.

The portal model estimates 16% upside to fair value, confirming undervaluation. But this calculation is based on current earnings, and if profit declines, the upside may shrink.

The 4.4% dividend yield exceeds the key rate, but the payout rests on profit that reached PHP 13,662.0m over the last twelve months

PH_UBP's trailing-twelve-month dividend yield is 4.4%, which is above the current key rate. This makes the stock attractive for investors seeking regular income. However, it is important to understand that the dividend is paid out of profit, which over the last twelve months amounted to PHP 13,662.0m.

Trailing-twelve-month profit is the sum of four quarters and includes both strong and weak periods. If profit declines in the future, the dividend may be cut. For now, the payout ratio is not disclosed, but with profit of PHP 13,662.0m and a market capitalisation of PHP 72,795.1m, dividend payments look sustainable if profit does not fall.

For an investor, the key question is whether the bank can maintain profit at the current level. Given the stagnation in net interest income, there is a risk of a dividend cut, but the current 4.4% yield remains attractive against the key rate.

The portal model estimates 16% upside to fair value – this is our own calculation, not a market consensus

According to the portal model, the upside potential for PH_UBP shares to fair value is 16%. This calculation is based on comparing ROE and P/B and is our own estimate, not a market consensus. It assumes that the current price is undervalued relative to the bank's fundamental value.

However, the model is sensitive to profit: if profit declines, fair value will also decrease. Given that net interest income is barely growing, the realisation of this upside depends on the bank's ability to maintain profit at the current level or find new sources of income.

For an investor, this means that the current price may be attractive, but growth is only possible if profit stabilises. In the next report, one should pay attention to the dynamics of net interest income and operating expenses.

Valuation on the latest reported figures

Bottom line

Bottom line: PH_UBP showed strong net profit growth of 69.3% year on year, but this growth is due to the low base of the previous year, not to an improvement in the business. Net interest income barely grew, which casts doubt on the sustainability of profit. At the same time, the stock trades at a P/E of 5.3 and a dividend yield of 4.4%, above the key rate, and the portal model implies 16% upside. The verdict is rather attractive, but confirmation of the trend requires growth in net interest income in the coming quarters.