UOB posts 7.8% fall in Q3 profit, hikes allowances for oil & gas loans

Automated Teller Machines (ATM) of United Overseas Bank (UOB) at UOB Plaza in Raffles Place.
Automated Teller Machines (ATM) of United Overseas Bank (UOB) at UOB Plaza in Raffles Place.PHOTO: ST FILE

SINGAPORE - Singapore's third largest bank UOB reported a 7.8 per cent fall in earnings for the third quarter as bad debt charges, largely from oil and gas loans, jumped nearly 16 per cent.

Net profit came in at S$791 million for the three months ended Sept 30 compared to S$858 million a year earlier. Bad debt charges rose 15.7 per cent.

The result was slightly better than the average forecast of S$771 million from five analysts polled by Bloomberg News, as loans grew at a 7 per cent pace compared with a decline of 2 per cent for rival Oversea-Chinese Banking Corp (OCBC).

But while net interest income was little changed, provisions for bad debts increased by 15.7 per cent to S$185 million from S$160 million in the year-ago quarter. The increase came largely from the oil and gas industry, said UOB.

UOB also saw a 33 per cent year-on-year jump in non-performing assets to S$3.6 billion as of end-September, compared with a year ago, similar to the rise for its OCBC, which reported its earnings a day earlier.

UOB deputy chairman and CEO Wee Ee Cheong said the bank expects subdued global economic growth and volatile market conditions in the months ahead.

Net interest income was stable at S$1.23 billion as the decrease in net interest margin of 8 basis points to 1.69 per cent was offset by a healthy year-on-year loan growth of 7 per cent, the bank said on Friday (Oct 28).

Non-interest income decreased 4.7 per cent to S$810 million. Fee and commission income grew 1.6 per cent to S$492 million on higher contributions from credit card and fund management income.

Trading and investment income declined 19.3 per cent to S$251 million, as results for the third quarter of 2015 included one-off gains from sale of investment securities, partly offset by higher net trading income.

Total expenses increased 1.6 per cent from a year ago to S$918 million due to higher revenue and IT-related expenses.

Total credit costs were maintained at 32 basis points with general allowance strong at S$3 billion as at the end of the quarter.