United Overseas Bank lifted net profit 17 per cent to $1.04 billion for the third quarter over the same period last year, broadly in line with expectations.
But earnings were 4 per cent down from the $1.08 billion racked up in the second quarter, as credit costs rose marginally.
This offset a 4 per cent rise in net interest income. Non-interest income also fell 13 per cent on a year-on-year basis.
JPMorgan analysts noted yesterday that UOB's earnings missed their estimates by 3 per cent, as the bank suffered its second straight quarter of falling net interest margins (NIM).
NIM declined by two basis points to 1.81 per cent for the third quarter, from 1.83 per cent for the second and 1.84 per cent for the first.
The analysts said: "Despite the near term under-performance, we remain overweight on UOB as we expect it to benefit from the rising rate cycle.
"Read-through for DBS and OCBC is not great, but higher mortgage rates at these two banks and letting go of US dollar deposits should lead to better outcome on NIM than UOB. We stay with our preference for DBS/OCBC versus UOB."
Goldman Sachs analysts wrote: "Results were in line with our expectation on most operating metrics. Margin surprised slightly to the downside though NIM was supported by strong loans. Asset quality improved quarter on quarter."
NIM was in line with Goldman Sachs' estimates, and strong loan growth for the quarter was driven largely by Greater China and less by other areas.
But non-interest income was slightly below estimates, and trading and investment income was weak, due mainly to lower gains from structural foreign exchange positions, they added.
UOB said of the quarter-on-quarter dip in NIM: "With the expectation of further interest rate increases, the group built up deposits during the quarter to ensure that its funding position remains well placed to meet projected business growth."
Net fee and commission income rose 2 per cent to $484 million due to higher loan-related, credit card and trade-related fees.
Other non-interest income fell 13 per cent to $244 million in the absence of stronger gains from investment securities recorded in the same period a year ago.
Total expenses rose 12 per cent to $1.01 billion, mainly from higher staff costs and IT-related expenses. The cost-to-income ratio for the quarter was 43.4 per cent.