UOB posts record profit of US$733mil for first quarter

SINGAPORE: United Overseas Bank (UOB) racked up record-breaking results in the first quarter thanks to a triple treat of higher net interest margins, strong growth in wealth management income and a big drop in bad debt charges.

Earnings shot up 21% to a new high of S$978mil (US$733) – beating Bloomberg’s average estimate of S$965.7mil from three analysts.

DBS Group Holdings reported its first-quarter results on April 30 also with earnings up 21%, to S$1.5bil. OCBC Bank reports its performance on Monday.

UOB said total income in the quarter rose 9% to S$2.23bil, led by strong growth in both net interest income, and net fee and commission income. Total expected credit loss or bad debt charges fell substantially due to a benign credit environment and reduced residual risks from the oil and gas and shipping sectors.

Higher net interest margins (NIM) coupled with loan growth of 5% lifted the net interest income to a record S$1.47bil, up 13% from a year earlier. Loan growth was broad-based across most territories and industries on the back of the improved operating environment over the year before.

NIM – defined as the difference between interest income generated and the amount of interest paid to lenders – increased 11 basis points to 1.84%, mainly due to higher loan margin and interbank yields amid a rising interest rate environment and the group’s proactive balance sheet management.

Loans stood at S$241bil as at March 31, up 5% year-on-year and 2% quarter-on-quarter.

Singapore loans rose 3% to S$129bil yearon-year, while regional countries registered strong loan growth of 10%. Malaysia, Thailand and Greater China posted double-digit loans growth, while Indonesia loans fell 8%. Net fee and commission income gained 18% to S$517mil. Strong momentum in wealth and fund management continued to support the uplift in fee income. Loanrelated fee income increased 24%, while credit card fees rose 11% year on year.

Other non-interest income fell 22% to S$244mil, mainly from lower net trading income due to fair-value changes on hedges of structural positions.

UOB said all business segments performed well. Total costs were up 11% over the same quarter last year, due to higher staff and IT-related expenses. The expense-to-income ratio increased one percentage point year on year to 44.2%.

The non-performing loan ratio eased to 1.7% from 1.8% at end-2017 but is still higher than the 1.5% in the year-ago quarter.

UOB shares closed yesterday down S$0.51 cents, or 1.72%, to S$29.07. — Singapore Straits Times