A Look at United Overseas Bank’s 2012 Results

2012 is looking to be a good year for local banks as United Overseas Bank (SGX: U11) posted a 20.5% increase in net profit from S$2.32b to S$2.80b. Other local banks like Overseas-Chinese Banking Corporation (SGX: O39) and DBS Group Holdings (SGX: D05) had also seen jumps in net profit of 73% and 11% respectively.

UOB, one of Singapore’s leading banks, saw a strong set of earnings, underpinned by its 14.4% increase of fee and commission income from $1.32b to $1.51b.  It also saw net interest income increase by 6.5% from S$3.68b to S$3.92b.

Despite the growth in profits, the bank reported lower net interest margins of 1.87% for 2012, a fall from 2011’s 1.92%. Similarly, both OCBC and DBS had also seen a compression of net interest margins in 2012. The former’s margins slipped by 9 basis points to 1.77% while the latter’s margins fell by 7 basis points to 1.70%.

UOB remains well capitalised as its Tier 1 and Total Capital Adequacy Ratios (CAR) stand at 14.7% and 19.1% respectively, significantly higher than MAS’s requirement of 6% and 10%. The bank’s management also commented that UOB is ‘well positioned to meet Basel III requirements which came into effect in Singapore on 1 January 2013’.

Interim dividends of S$0.20 per share were paid out in September 2012 and dividends of $0.50 per share have been recommended by the bank’s directors, subject to shareholders’ approval. If approved, it would bring total dividends for 2012 to S$0.70, an increase from the dividends of S$0.60 per share paid in 2011.

Moving forward, UOB’s Deputy Chairman and CEO, Mr Wee Ee Cheong had this to say: “This set of results represents a very positive end to 2012. We achieved record profits, record fees and record contribution from our key regional markets. To keep this momentum going, we will continue to sharpen our focus on our key drivers – balance sheet strength, people and infrastructure. Amid global uncertainties, while Asia is slowing down it is expected to stay resilient. Southeast Asia especially is expected to see stronger growth. Our customer franchise, distribution network and integrated platform, especially across Southeast Asia, places us in a prime position to seize opportunities that come with increasing intra-Asian business flows. We are well on track to realising our long-term growth targets.”

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Contributor Chong Ser Jing doesn’t own shares in any companies mentioned.