United Overseas Bank (UOB) yesterday proposed a higher final dividend and increased its core payout to 80 cents per annum as it posted a 16 per cent gain in fourth-quarter net earnings.
However, this failed to stem the slide in its share price.
The bank said it will pay a final dividend of 45 cents per share for last year, as well as a special dividend of 20 cents.
Including the interim dividend of 35 cents that has been paid, the core dividend for the financial year ended Dec 31, 2017 is 80 cents per share, up 14 per cent from 2016. The scrip dividend scheme will be applied to the final and special dividends.
For last year, the total dividend of $1, inclusive of the special dividend, represents a 49 per cent payout ratio.
UOB chief financial officer Lee Wai Fai said that from this year, the bank will increase its core dividend to 80 cents per share.
Said UOB chief executive Wee Ee Cheong: "Despite headwinds in the last couple of years, particularly in the oil and gas sector, our balance sheet remains strong, with robust capitalisation and reserves buffer as well as ample liquidity.
AT A GLANCE
$8.85 billion (+10%)
$3.39 billion (+9%)
Total dividends per share:
"Coupled with our steady earnings growth momentum, we are able to reward our shareholders with an increase in core dividend to 80 cents per ordinary share, and a special dividend of 20 cents for 2017."
Based on Tuesday's closing price of $26.84, the yield is 3.73 per cent, said Mr Lee.
But shareholders were not convinced, sending the stock down 2.2 per cent to close at $26.24 yesterday.
UOB has lost $2.22 since its Jan 25 high of $28.46.
In contrast, DBS Group Holdings has gained $3.18 to $28.03 since the start of the year.
Last Thursday, it announced a final dividend of 60 cents a share for last year and also a special dividend of 50 cents a share as a one-time return of capital buffers that had been built up and to mark the bank's 50th anniversary.
DBS also said that from this year, it will pay $1.20 per share in annual dividends - double its payout in three of the past four years.
UOB's payout ratio of 49 per cent for last year is higher than the 37 per cent in 2016.
Mr Wee said that with good earnings, he was confident of increasing the payout.
UOB said fourth-quarter net earnings rose 16 per cent to $855 million from a year ago, largely due to an increase in net interest income, fee and commission income, and net trading income.
The increase was partly offset by higher operating expenses and allowances.
Net interest income rose 15 per cent to $1.46 billion, contributed by higher net interest margin (NIM) and loan growth.
NIM improved 12 basis points to 1.81 per cent, due to active balance sheet management and a rising interest rate environment.
Loans rose 5 per cent, and Mr Wee sees high single-digit loan growth this year.
Non-interest income increased 12 per cent to $846 million.
Fee and commission income grew 10 per cent as a result of strong growth in the wealth management, fund management and credit card businesses.