UOB: Record First-Quarter Profits

UOB logoFollowing record first-quarter results from DBS Group Holdings (SGX: D05), another local bank, United Overseas Bank (SGX: U11), has reported record quarterly profit of S$722m. An increase of 4.9% increase from last year.

UOB grew Total Income for the quarter by 2.7% from S$1.63b last year to S$1.67b. The growth was driven by the bank’s 12% rise in quarterly Non-interest Income to S$708m. The increase in Non-interest Income was due to “strong growth in lending, fund management, capital market and wealth management businesses”, which helped offset lower gains from the sale of securities.

Quarterly Net Interest Income for the bank decreased slightly by 3.5% to S$964m from S$998m a year ago due to “compressed asset yields”. Net interest margins (NIM) fell by 28 basis points 1.7%. There was also a sequential fall in NIM from 1.76% that was attributed to declining yields

UOB’s capital structure remains comfortably in line with the Monetary Authority of Singapore’s (MAS) Basel III capital adequacy ratio (CAR) requirements. The bank’s Common Tier 1 Equity CAR and Total CAR stands at 14.3% and 18% respectively, much higher than MAS’s requirement of 4.5% and 10%.

The bank’s Deputy Chairman and Chief Executive Officer, Mr Wee Ee Cheong commented on the quarter: “UOB continues to deliver strong, sustainable profits by strengthening its regional network and product capabilities. We started 2013 well, posting a record quarter of profit and fees.

Despite this strong start, we are mindful that overall growth is expected to moderate this year. Within Asia, especially Southeast Asia, business and economic fundamentals remain sound and we will continue to see ample liquidity and intense competition.

Given our balance sheet strength, we are well-positioned to navigate the changing landscape even as Basel III implementation kicks in this year. With our regionalisation initiatives on track, we remain confident of furthering our regional wholesale and wealth management business.”

UOB’s shares climbed 3% to $22. They are trading at 1.4 times book value and yield 3.2% based on last year’s payout.

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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.