United Overseas Bank (UOB) sees no systemic risk to its credit quality as its exposure to the turbulent commodity sector and China is limited.

It also noted yesterday that its strong balance sheet means it can weather the uncertainties ahead stemming from a global economic slowdown and weak energy prices.

The remarks came as the bank announced a 0.3 per cent rise in net profit to $788 million for the fourth quarter over the same period last year, matching the average estimate of analysts polled by Bloom- berg. Total revenue for the three months to Dec 31 came in 12.5 per higher at $2.08 billion.

Earnings for the quarter were partly offset by a 58.1 per cent rise in specific allowances on loans to $115 million for potentially non-performing accounts in Singapore, Indonesia and Greater China.

The non-performing loan (NPL) ratio crept up from 1.3 per cent in the third quarter and 1.2 per cent a year earlier to 1.4 per cent. The NPL volume jumped 22.2 per cent year on year in the fourth quarter to $2.88 billion, due mostly to soured accounts in Indonesia, particularly in the shipping industry.

These figures underline market concerns about system-wide NPL issues as regional businesses struggle amid weak economic growth and plunging oil prices.

In a worst-case scenario, UOB could see its NPL ratio hit 2 per cent in 2016 or beyond, but chief executive Wee Ee Cheong said yesterday the impact would be manageable.

"We have around $21 billion (of assets) on commodities. Of this, oil and gas exposure is $12 billion. If oil prices continue to stay low, we estimate 20 per cent of our oil and gas portfolio - around $2 billion and only 1 per cent of group portfolio - may show weakness," he said at the bank's results briefing.

The bank also has a $21 billion exposure - around 6.6 per cent of total assets - to China, but credit quality in the country is secure as UOB's clients are mostly top banks and state-owned enterprises, he added.

With total allowances at 130.5 per cent of total NPL, and credit costs unchanged at 0.32 per cent through 2015, UOB does not expect any ugly surprises. Mr Wee said: "We have reviewed our portfolio, and we are comfortable. The countries in South-east Asia have strong foreign reserves, corporate and banking balance sheets are in much better shape. It's a slowdown, yes, but very much manageable.

"The impact to us is on profitability, not on balance sheet. We can weather this volatility. In fact, we see opportunities to strengthen our franchise in such times."

UOB's earnings growth in the fourth quarter was broad-based, with trading and investment income rising 64.3 per cent to $263 million while fee income expanded 6.7 per cent to $480 million. Total non-interest income was $803 million, up 17.9 per cent year on year.

Net interest margins improved to 1.79 per cent from 1.69 per cent a year ago, lifting net interest income by 9.3 per cent to $1.28 billion even as loans grew only 4 per cent year on year in the fourth quarter. The loans growth rate in 2016 will remain mid-single digit, Mr Wee said.

Net profit was $3.21 billion for the full year, down 1.2 per cent from 2014, while total revenue was up 7.9 per cent at $8.05 billion. Earnings per share was flat at $1.90 for the fourth quarter and down 2 per cent at $1.94 for 2015. Net asset value was $17.84 a share as of Dec 31, up 4.4 per cent from a year ago.

UOB recommended a final dividend of 35 cents per share, down from 50 cents a year ago. But the total dividend for 2015 was up 20 per cent at 90 cents per share due to a 20-cent special dividend for the bank's 80th-anniversary celebration. UOB shares closed four cents lower at $17.81 yesterday after the results announcement.