United Overseas Bank (UOB) will reward shareholders with a bumper special dividend to commemorate the bank's 80th anniversary, it announced yesterday.
The 20-cent-per-share payout, which will cost the bank around $322 million, can be taken in cash or new stock. UOB has already paid an interim dividend of 35 cents per share this year.
Investors cheered the news and made a beeline for UOB shares yesterday, sending the counter up 29 cents or 1.45 per cent to $20.33 despite the subdued set of numbers for the third quarter.
Revenue for the three months to Sept 30 gained 5.8 per cent year-on-year to $2.09 billion but net profit dropped 1 per cent to $858 million, UOB announced before markets opened yesterday.
Earnings per share was $2.07 in the quarter, down from $2.10 a year earlier, while net asset value stood at $17.49 per share, up from last year's $16.51.
ON A FIRM FOOTING
Our results demonstrate continued resilience amid volatility. Core revenue growth was led by net interest income and fee income while capital and funding positions remain robust.
MR WEE EE CHEONG, UOB's chief executive, saying the bank's core banking earnings remain healthy
Part of the earnings drag came from the lower trading income, which dipped 26.5 per cent to $163 million, reflecting the choppy market environment in August and September. The same disruptions had also hit OCBC, which reported a 64 per cent drop in its life assurance profit earlier this week on the back of unrealised investment losses.
AT A GLANCE
REVENUE: $2.09 billion (+5.8%)
NET PROFIT: $858 million (-1%)
NPL RATIO: 1.3% (+10 basis points)
But UOB was able to reap one-off gains from sale of investment securities. With a 2.1 per cent rise in fee and commission income - including a 4.4 per cent increase in wealth management income to $104 million - total non-interest income grew 4.2 per cent year-on-year or 19.1 per cent from the second quarter to $850 million.
Chief executive Wee Ee Cheong noted in a statement that UOB's core banking earnings remain healthy.
"Our results demonstrate continued resilience amid volatility. Core revenue growth was led by net interest income and fee income while capital and funding positions remain robust," he said.
Net interest income was up 6.9 per cent year-on-year at $1.24 billion, with net interest margins improving six basis points to 1.77 per cent, higher than OCBC's 1.66 per cent.
This was due to the quarter's improved loan yields as UOB's loan portfolio was repriced on rising interbank and swap offer rates.
Net customer loans amounted to $199.59 billion in the quarter, up 3.6 per cent year-on-year to reflect a slowing demand for loans across the industry.
Non-performing loans rose 11.4 per cent year-on-year and 1.9 per cent quarter-on-quarter to $2.55 billion, with an NPL ratio of 1.3 per cent.
The asset quality of regional banks is a concern now amid the economic headwinds, which have put corporate borrowers under financial pressure.
But UOB stressed that its asset quality remained resilient, pointing to its ample NPL coverage of 142.7 per cent. This means the bank has set aside more allowances than necessary to cover for its NPL, a norm among local banks. OCBC's third-quarter NPL coverage was 121 per cent.