UOB Banks In On Record Half-Year Earnings

UOB logo It’s been a good six months for banks. Yesterday morning, DBS (SGX: D05) posted record half-year earnings. In the evening, United Overseas Bank (SGX: U11) announced that it earned a profit of S$1.5b for the first half of the year, breaking its own record for half-year profits.

UOB’s first quarter results are found here. Let’s zoom in on its performance for the second quarter.

The bank’s quarterly total income inched up by 2.1% to S$1.64b compared to a year ago as growth in net interest income and fee & commission income helped to offset a decline in other non-interest income.

UOB’s net interest income registered a 3.5% year-on-year gain to S$1.02b while fee & commission income grew by 13% to S$436m. Net interest income had increased on the back of higher loan volumes, which helped offset a 21 basis-point drop in net interest margin to 1.71% from a year ago.

Fee & commission income’s 13% growth was the result of higher fees from trade-related, credit card and wealth management products.

Other non-interest income slid by 21% year-on-year to S$191m, predominantly due to trading losses incurred from the sale of government securities.

The bank’s total expenses had grown by 9% to S$726m in support of its business expansion, outpacing top-line growth. But, that was more than made up by smaller impairment charges and a larger slice of profits from the bank’s associates, ultimately leading to a 9.9% year-on-year quarterly profit growth to S$783m.

UOB’s non-performing-loan (NPL) ratio had decreased by 20 basis points from a year ago to 1.2% for the quarter. That’s good news for UOB’s shareholders as a decrease in the NPL ratio is a sign of a stronger loan-portfolio for the bank.

The bank’s balance sheet remains “well capitalised”. UOB’s capital adequacy ratios (CAR), which measures the amount of ‘cushion’ a bank has on its balance sheet to withstand losses, stands at 13.6% for its Common Equity Tier 1 CAR and 17.2% for its Total CAR. Those figures are well above the Monetary Authority of Singapore’s requirements of 4.5% and 10% respectively.

Interim dividends of 20 cents per share for the half-year, unchanged from a year ago, have been declared by UOB.

UOB’s Chief Executive Officer, Wee Ee Cheong, commented on the bank’s future, “While recent talks about QE tapering in the US have led to market volatility, the US economic outlook has improved, which is a positive development for this part of the world. Policy makers regionally have also introduced preemptive measures to manage asset price inflation and consumer leverage. With our strong capital and balance sheet, we are confident of riding out any uncertainty ahead.”

He went on to add that, “Asia’s long-term fundamentals remain sound, backed by expanding intra-regional business flows and rising consumer affluence. With our integrated regional network and disciplined approach to growth, we are well placed to seize opportunities in the evolving banking landscape ahead.

UOB closed Thursday’s trading session at S$21.80, giving its shares a price-to-book value of 1.46 and a historical dividend yield of 3.2% based on 2012’s full year pay-out.

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