UOB Group has beaten market forecasts to post a strong first-quarter result, much in line with rival DBS' performance last week.
Singapore's third-largest bank racked up an 18 per cent increase in earnings - its first rise in more than a year - to $1 billion for the three months to March 31. That trumped the net profit of $855 million in the same period last year and easily out-paced the $926 million average estimate of three analysts polled by Bloomberg.
Chief executive Wee Ee Cheong expects this momentum to continue as economic and business activity picks up and market sentiment improves across the region, starting with Singapore and Greater China.
"Across our key markets, we are seeing robust credit demand from our large corporate and institutional clients... Asia's prospects remain bright. Even so, we stay vigilant and nimble," he said.
Mr Wee told a media briefing yesterday that UOB will look at Citigroup's assets in the markets the foreign bank is exiting, just as DBS and OCBC are doing: "We are always open to acquisition opportunities ... as long as it's a strategic fit, and at a right price, and it has to make sense for the long term."
Citi said last month it would exit its consumer franchises in 13 markets, 10 of which are in Asia, as it refocuses on its institutional and wealth management businesses in these markets.
UOB is still waiting for details, which are expected to be released later this month, said group chief financial officer Lee Wai Fai.
UOB's net interest income dipped 4 per cent to $1.53 billion as loan growth was more than offset by the impact of rate cuts on margins across the region. Net interest margin, a key gauge of banks' profitability, was stable at 1.57 per cent.
Fee income was 24 per cent higher at $638 million, led by wealth, loan-related and fund management fees. Trading and investment income rose 10 per cent to $246 million, largely due to higher net gains from investment securities.
Impairment charges fell 29 per cent to $201 million while the non-performing loans (NPL) ratio improved to 1.5 per cent, from 1.6 per cent a year ago.
Credit costs fell 7 basis points to 29 basis points as it set aside lower allowances for impaired loans.
Annualised earnings per share for the quarter stood at $2.36, up from $2 a year ago.
Despite the improved earnings, the bank said it is slightly premature to write back provisions, said Mr Lee. "While NPL emergence is low, we are conscious that the various support measures may have a lagging effect on NPL, so we remain cautious," added Mr Lee, who said the bank will slow down the addition of provisions.
Mr Wee called Covid-19 a "black swan" that caught everyone by surprise: "While the earnings are good, we continue to provide and make sure our capital is strong."
UOB had total allowances of $4.7 billion as at March 31.
Its loans under moratorium have remained unchanged from January. Loans under government relief programmes fell from $11 billion in December to $3 billion in January as debt holidays across the group's markets ended, making up 1 per cent of the bank's total loans.
The bank expects its profit to rebound this year, driven by high single-digit loan growth, double-digit non-interest income growth, a stable cost-to-income ratio and lower credit costs.
UOB shares closed 1.03 per cent lower at $26.03 yesterday.
