United Overseas Bank racked up record-breaking results in the first quarter thanks to a triple treat of higher net interest margins, strong growth in wealth management income and a big drop in bad debt charges.
Earnings shot up 21 per cent to a new high of $978 million - beating Bloomberg's average estimate of $965.7 million from three analysts.
DBS Group Holdings reported its first-quarter results on Monday, also with earnings up 21 per cent, to $1.5 billion. OCBC Bank reports its performance next Monday.
UOB said total income in the quarter rose 9 per cent to $2.23 billion, led by strong growth in both net interest income, and net fee and commission income. Total expected credit loss or bad debt charges fell substantially due to a benign credit environment and reduced residual risks from the oil and gas and shipping sectors.
Higher net interest margins (NIM) coupled with loan growth of 5 per cent lifted the net interest income to a record $1.47 billion, up 13 per cent from a year earlier. Loan growth was broad-based across most territories and industries on the back of the improved operating environment over the year before.
NIM - defined as the difference between interest income generated and the amount of interest paid to lenders - increased 11 basis points to 1.84 per cent, mainly due to higher loan margin and interbank yields amid a rising interest rate environment and the group's proactive balance sheet management.
AT A GLANCE
TOTAL INCOME: $2.23 billion (+9%)
NET PROFIT: $978 million (+21%)
Loans stood at $241 billion as at March 31, up 5 per cent year on year and 2 per cent quarter on quarter.
Singapore loans rose 3 per cent to $129 billion year on year, while regional countries registered strong loan growth of 10 per cent. Malaysia, Thailand and Greater China posted double-digit loans growth, while Indonesia loans fell 8 per cent.
Net fee and commission income gained 18 per cent to $517 million. Strong momentum in wealth and fund management continued to support the uplift in fee income. Loan-related fee income increased 24 per cent, while credit card fees rose 11 per cent year on year.
Other non-interest income fell 22 per cent to $244 million, mainly from lower net trading income due to fair-value changes on hedges of structural positions.
UOB said all business segments performed well.
Total costs were up 11 per cent over the same quarter last year, due to higher staff and IT-related expenses. The expense-to-income ratio increased one percentage point year on year to 44.2 per cent.
The non-performing loan ratio eased to 1.7 per cent from 1.8 per cent at end-2017 but is still higher than the 1.5 per cent in the year-ago quarter.
UOB shares closed down 41 cents to $29.58 yesterday.