UOB posts 4.4% drop in Q1 profit to $766m

Office workers walking in front of the UOB Centre located along Robinson Road at Raffles Place.
Office workers walking in front of the UOB Centre located along Robinson Road at Raffles Place. ST PHOTO: KUA CHEE SIONG

SINGAPORE - UOB Group reported on Thursday (April 28) a 4.4 per cent decline in net earnings to S$766 million for the first quarter ended March 31 from the year-ago period.

Total income rose slightly to S$1.97 billion mainly supported by higher net interest income. Compared with the fourth quarter of 2015, net earnings were 2.8 per cent lower.

Net interest income grew 6.1 per cent to S$1.27 billion on-year, driven by improved net interest margin and an expanded loan base. Net interest margin increased 2 basis points to 1.78 per cent, benefitting from higher interbank and swap offer rates in Singapore.

Non-interest income declined 8 per cent to S$695 million, mainly from lower wealth management fees and trading and investment income. UOB attributed this to softer investor appetite due to volatile market conditions.

Total allowances decreased 30.7 per cent from a year ago to S$117 million. Specific allowances on loans increased S$71 million to S$133 million offset by a write-back of general allowances on debts. UB sad it continued to maintain total credit costs at 32 basis points as its credit portfolio remained stable.

When compared with the previous quarter, total allowances fell 38.4 per cent to S$117 million in the first quarter. Specific allowances on loans increased 15.2 per cent to S$133 million mainly due to commodity-related non-performing loans. This was partially offset by lower specific allowances in Greater China and Singapore

Total expenses increased 4.9 per cent from a year ago to S$894 million, largely from higher staff costs, revenue and IT-related expenses.

UOB said gross loans grew 3 per cent year-on-year and 1 per cent from the previous quarter to S$209 billion as at March 31. In constant currency terms, the underlying loan growth was 5 per cent from a year ago.

Customer deposits increased 6.4 per cent from a year ago and 5.9 per cent quarter-on-quarter to S$255 billion, mainly from growth in Singapore dollar and US dollar deposits. The bank said the group's loan-to-deposit remained healthy at 80.7 per cent.

UOB is the first of Singapore's Big Three banks to report first-quarter results. OCBC will do so on Friday while DBS will release its report next Tuesday.