UOB Malaysia net profit drops 16.8pc to RM1.02b

United Overseas Bank Malaysia Bhd’s (UOB Malaysia) net profit fell 16.8 per cent to RM1.02 billion for the financial year 2020 as it made preemptive provisioning on assets due to the Covid-19 economic impact.

It said its total operating income increased 3.7 per cent to RM3.21 billion last year, contributing a 5.7 per cent growth in its net interest income to RM2.2 billion, driven by proactive balance sheet management.

It also said the increase in net interest income was offset partially by the effects of the cuts in the Overnight Policy Rate to a historical low of 1.75 per cent between Jan 22 and July 7 last year.

“While trading and investment income for the year grew, lower fee income and net foreign exchange gains led to a 3.5 per cent drop in non-interest income to RM938.8 million,” it said.

UOB Malaysia said its profitability was impacted as its operating income growth was offset partially by an increase in allowances from the pre-emptive provisioning made for expected credit losses for impaired and non-impaired assets.

“The allowances were RM356.1 million more than the previous year, largely for expected losses categorised as stage one (within the next 12 months) and stage two (indefinitely) on its loans, advances and financing portfolio.

“Nonetheless, the bank maintained its sound asset quality with the net non-performing loan ratio sustained at 1.4 per cent.”

Total operating expenses increased 1.1 per cent to RM1.28 billion, while capital, funding and liquidity positions in last year’s gross loans, advances and financing rose 1.5 per cent to RM87.5 billion and non-bank deposits increased by five per cent to RM93.6 billion.

UOB Malaysia continued to maintain its strong capital base with its Common Equity Tier One and total capital ratios at 17.6 and 20.5 per cent, respectively.

While trading and investment income for the year grew, lower fee income and net foreign exchange gains led to a 3.5 per cent drop in non-interest income to RM938.8 million.