UOB's Q1 net profit rises 1.6%, slightly below expectations

SINGAPORE - United Overseas Bank, Singapore's third-biggest lender, posted a 1.6 per cent rise in quarterly profit, but the earnings were slightly below analysts' average forecast as the bank reported slower loan growth than its two rivals.

UOB said net profit for the January-March period came in at $801 million, slightly below an average forecast of $807 million from six analysts polled by Reuters, and 1.9 per cent higher than fourth quarter of 2014. UOB reported a net profit of $788 million a year earlier.

UOB saw loan growth of 7.8 per cent from a year earlier versus 20 per cent for Oversea-Chinese Banking Corp, Singapore's second-biggest lender, which earlier posted an 11 per cent rise in first-quarter net profit DBS Group Holdings, Singapore's biggest bank, reported loan growth of 11 per cent from a year earlier.

Other Q1 highlights:

1. Broad-based increase in core income

UOB said operating profit recorded a double-digit growth of 10.7 per cent to $1.10 billion as loans grew a steady 7.8 per cent from a year ago, across most industries and territories, to $203 billion as at March 31, 2015.

Net interest income rose 8.3 per cent from a year ago to $1.20 billion. Net interest margin increased 3 basis points to 1.76 per cent, lifted by improved loan pricing and higher securities yield.

2. Non-interest income up

It grew 17.5 per cent from a year ago to $755 million. Fee and commission income was reported at $453 million with growth coming mainly from wealth management and credit card fees but offset by lower loan and trade related fees. Trading and investment income increased 40.2 per cent to $225 million due to higher treasury customer income, investment and trading gains.

3. Total operating expenses up

Rose 12.9 per cent year-on-year to $852 million, largely due to higher staff costs, revenue and IT-related expenses. Expense-to-income ratio was relatively stable at 43.6 per cent.

4. Asset quality stayed healthy

Non-performing loans ratio stable at 1.2 per cent. Total loan charge-off rate remained at 32 basis points while total impairment charges increased 7.6 per cent to $169 million on the back of a larger loan book.

5. Stronger liquidity position

Liquidity position strengthened as customer deposits expanded 10.5 per cent from a year ago and 2.4 per cent over the previous quarter to $239 billion as at 31 March 2015, mainly led by US-dollar deposits. Total and SGD loan-to-deposit ratios remained healthy at 83.4 per cent and 94.5 per cent respectively as at March 31, 2015.

Said Mr Wee Ee Cheong, UOB Group?deputy chairman and chief executive officer: "We are off to a good start to the year with our first quarter results. Net interest income was lifted by widening margins and growth in loans across our core markets and customer segments.

?"Even as market volatility is likely to persist, we remain focused on building our core franchise for the long-term."