UOB's Q2 earnings up on boost from trading activities

(From left) Mr Wee and Mr Lee at yesterday's briefing. Higher non-interest income lifted overall profits at UOB, which declared an interim cash dividend of 35 cents per ordinary share, to which its scrip dividend scheme will apply.
(From left) Mr Wee and Mr Lee at yesterday's briefing. Higher non-interest income lifted overall profits at UOB, which declared an interim cash dividend of 35 cents per ordinary share, to which its scrip dividend scheme will apply.PHOTO: BLOOMBERG

A better performance in trading activities boosted second-quarter earnings, United Overseas Bank (UOB) reported yesterday.

The bank, the third-largest listed one here, saw net profit rise to $801 million, up 5.1 per cent for the three months ended June 30 compared with the same period last year. This beat an average forecast of $769 million in a Reuters poll of five analysts.

Net interest income dipped marginally 0.2 per cent to $1.21 billion as the effects of loan growth were offset by net interest margins falling 9 basis points to 1.68 per cent.

At a briefing yesterday, chief executive Wee Ee Cheong cited lower short-term interest rates here and more competitive loan pricing.

The standout performer was non-interest income, which grew 13.9 per cent to $813 million because of stronger trading activities.

Fee and commission income inched up 2 per cent to $475 million thanks to higher wealth management and credit card fees.

  • AT A GLANCE

  • TOTAL INCOME

    $2.02 billion (+5%)

    NET PROFIT

    $801 million (+5.1%)

    INTERIM DIVIDEND

    35 cents a share (unchanged)

Net profit in the first half grew marginally by 0.2 per cent to $1.57 billion, while total income rose 2.8 per cent to $3.99 billion.

Despite market volatility, and concerns over the oil and gas sector and Brexit, Mr Wee said the bank's financial position and balance sheet remain strong.

The second-quarter non-performing loans ratio was 1.4 per cent, a tad above last year's 1.2 per cent, but unchanged from the first quarter.

Total allowances - a key gauge of how much a bank sets aside to cover potentially risky loans - increased 5.7 per cent to $161 million given a larger loan base.

Quarterly earnings per share came to $1.94, up from $1.84 in the same period a year ago, while net asset value per share was $18.16 as at June 30, up from $17.71 a year ago.

Mr Wee said UOB had kept its market share in Singapore housing loans, but "the pipeline is slow and expected in a soft property market".

Chief financial officer Lee Wai Fai said the upstream segment in oil and gas is considered "more vulnerable" with UOB's exposure at $4.9 billion. He said: "We have reviewed our position and expect total credit costs of 32 basis points for the year to be sufficient to recover emerging losses."

Mr Lee was also asked at the briefing if there would be an impact from the winding up of offshore engineering firm Swiber Holdings, which was announced yesterday.

"This is something we've been monitoring very closely," he said.

"In the last quarter, we said there were a number of accounts we were watching, and this was just one of those. It's nothing new to us."

Mr Wee said there are no concerns and it was manageable.

UOB has declared an interim cash dividend of 35 cents per ordinary share, and the scrip dividend scheme will be applied.

UOB shares closed 24 cents down at $18.70 yesterday.

A version of this article appeared in the print edition of The Straits Times on July 29, 2016, with the headline 'UOB's Q2 earnings up on boost from trading activities'. Print Edition | Subscribe