United Overseas Bank (UOB) has announced plans to ramp up its digital strategy with a digital bank due for launch in its key South-east Asian markets.

The announcement yesterday coincided with the bank reporting a 28 per cent rise in net profit for the second quarter on the back of stronger overall operating income.

Net profit for the three months ended June 30 stood at $1.08 billion, up from $845 million in the same period last year, beating estimates provided by S&P Capital IQ of $967 million. The net profit translates to annualised earnings per share of $2.51, up from $2 a year ago.

Net interest income grew 14 per cent to $1.54 billion, supported by loan growth of 10 per cent and an improvement in net interest margin by eight basis points to 1.83 per cent.

Non-interest income was up 6 per cent to $800 million, as stronger fee income was slightly offset by a weaker gain from investment securities. Net fee and commission income rose 11 per cent to $498 million, though other non-interest income decreased by 3 per cent to $302 million.

Total expenses for the quarter rose 10 per cent from a year ago to $1.02 billion, mainly from staff expenses and planned IT-related investments. The cost-to-income ratio stood at 43.6 per cent.

The bank said separately yesterday that it would launch a digital bank in its key Asean markets, with the aim to grow a base of three million to five million customers in the next five years.

The digital bank will be operated at a "steady-state" cost-to-income ratio of 35 per cent, it said.

It is believed UOB is expected to look at the five markets of Singapore, Indonesia, Malaysia, Thailand and Vietnam, with the bank sharpening its focus on mobile-savvy customers by "(wrapping) technology in the human touch".

It said it would use a "unique data-centric business model" that taps the entire customer life cycle comprehensively.

UOB said it would rely on its in-house digital technology development, as well as its collaboration with fintech partners, such as its recent joint venture with credit assessment firm Avatec.ai, and its investment and partnership with data analytics firm Personetics.

On its quarterly results, UOB said allowances halved to $90 million in the second quarter from a year ago, with the year-ago figure mainly driven by specific allowance set aside for non-performing loans (NPL) from the oil-and-gas and shipping sectors.

The NPL ratio for the quarter stood at 1.7 per cent, up from 1.5 per cent.

The bank has declared an interim dividend of 50 cents per share, up from 35 cents per share.

DBS on Thursday reported an 18 per cent gain in net profit for the second quarter that missed estimates on the street, as stronger net interest income was offset in part by a fall in non-interest income on lower trading income.

The bank has dialled back its property loans growth forecast by $1 billion, as last month's cooling measures are expected to hit sentiment.

DBS' treasury markets income for the second quarter also dropped 59 per cent from a year ago to $107 million, due to a "perfect storm" of widened Asian credit spreads on the back of trade tensions, a flattened yield curve impacting its bond holdings and the equity market sell-off.

Speaking to reporters on Thursday, DBS chief Piyush Gupta said "the biggest problem... is the spillover impact", given United States-China trade tensions.

"That links back to the treasury markets business. The spillover impact really winds up with the confidence issue; it's a market psychology issue more than what really happens to the underlying trade flows," he added.