Analysis of the UnionBank’s Stock Prices Movement

In the Philippines, UnionBank is the seventh-largest publicly traded bank and is

renowned for being the most creative and leading bank in terms of digital transformation. On the
23rd of December 2021, a news report written by Agcaoili (2021) announced that UnionBank of
the Philippines will acquire Citi's Philippine consumer banking operations for approximately 55
billion. According to Edwin Bautista, president and CEO of UnionBank, Citibank Philippines
has a fantastic, successful, and well-managed retail portfolio since it has the third biggest credit
card franchise and is the leading wealth
management provider in the nation.
According to statistics from
February to December, the stock price of
UnionBank jumped from ₱53.86 to ₱90.66
following the announcement that it would
acquire Citibank's local retail business.
Before the acquisition, UnionBank’s stock
prices were relatively stable. The ₱36.74
increase shows that the acquisition
announcement has boosted the value of
UnionBank's stock. Since the news added new information to the previously available data, it
altered the value of UnionBank's stocks, which encouraged investors to buy before stock prices
increased. However, upon closer look in the month of December 2021, stock prices actually went
down to ₱90.66 from its highest record of ₱98.36. The announcement of acquisition alone is
enough to cause market volatility, which has an impact on stock prices. This is because there are
still risks associated with the COVID-19 pandemic to the region's banking industry, making it
unpredictable if the substantial investment would be profitable.
On the 20th of January 2022, the recent purchase of a consumer banking company by
Union Bank of the Philippines, which is expected to reduce the bank's capital cushion, caused
MOODY'S Investors Service to lower its outlook for the institution from stable to negative. At a
time when asset risks are still being driven by the pandemic, UnionBank's acquisition of
Citigroup Inc.'s P55 billion business may negatively impact its solvency. However, despite
Moody’s negative outlook, it had no effect on the trading of UnionBank stocks, which rose to
1.78%, or ₱92.09. Investors are likely not too alarmed to pull out of their investment due to its
high potential earnings from the acquisition. Fast forward to the 30th of March 2022, Union
Bank of the Philippines (UBP) was penalized by the Philippine Stock Exchange. The stock
prices of UnionBank were impacted by this information, which led to several investors
withdrawing their investments. However, the decline in the stock value of UnionBank didn’t last
long when the news of UnionBank’s president dumping 174k via a stock right offering came out.
This news led to more shares being offered to the public, which stimulated investors to make
investments. Therefore, UnionBank stock prices increased by 2.95%. Upon seeing the planned
additional 800k shares offered at a discounted price between P64.55 and P73.78 per share,
several investors withdrew their investments. The quantity of common stock traded on the stock
market rises as a result of company share issuance. Therefore, the existing investors probably felt
that the issuance of an excessive number of shares may dilute their ownership of the company.
In the case of UnionBank’s movement of stock prices, we can see that a certain event can
cause the price of its stock to either increase or decrease. The anticipated takeover over Citibank
increased UnionBank’s stock price due to its huge potential earnings which prompted investors
to buy stocks. However, there are some instances where investments were pulled out due to
uncertainties felt by the investors about the information released to the public. Although stock
prices change every day, we can see that several factors such as specific news about a company
acquiring another company to issuing additional stocks affected the stock prices of UnionBank.
In this analysis, it is important to point out that the market becomes more efficient as more
information are available to all market participants.