Bad loans take shine off UOB’s stronger-than-estimated profit

SINGAPORE: Troubles in the oil and gas (O&G) services industry took the gloss off United Overseas Bank Ltd’s results, with bad loans increasing the most in more than a year.

The Singaporean lender declared S$799 million (RM2.48 billion) of new non-performing assets in the three months to September, overshadowing a better-than-expected profit figure that was driven by higher interest income and wealth-management fees.

The new bad loans were largely due to one “large account” in the O&G sector, said chief financial officer Lee Wai Fai in a slide presentation, without naming the company.

Exposures to that industry “remained under stress”, though the bank had set aside “adequate levels of allowances”, said Lee.

While rising domestic interest rates have allowed Singaporean banks to charge more for loans, the energy services industry’s continuing struggles have dragged on their exposures to the sector. UOB’s larger competitor Oversea-Chinese Banking Corp last week reported a 12 per cent profit gain amid higher interest and wealth income.

UOB’s third-quarter net income rose by the same percentage to S$883 million, the bank reported yesterday. That beat the S$841 million average forecast in a Bloomberg survey of six analysts, as net interest income gained 15 per cent.

Fee income from UOB’s wealthmanagement operations rose 40 per cent to S$143 million during the third quarter. The bank has been growing its own wealth business rather than relying on acquisitions like OCBC and DBS Group Holdings Ltd, its two larger competitors.

Still, those gains were offset by lower trading income, higher operating expenses and allowances for loans. The new nonperforming assets (NPAs) drove the bank’s total NPAs to S$3.92 billion in the period. Bloomberg