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5 Things I Like About United Overseas Bank Ltd’s Latest Earnings Update

United Overseas Bank Ltd (SGX: U11), or UOB, is one of the three major banks based in Singapore. Early last month, the bank announced its 2018 second quarter (2Q18) earnings update. Here are five positive things that I think investors should know about its results.

The results

Here’s a quick summary of some key financial metrics for 2Q18.

Source: UOB’s Results Presentation

Overall, we can see that most metrics improved on a year-on-year basis. But there are more to these numbers.

First of all, total income grew 11% year-on-year to S$2.3 billion mainly due to strong growth in both net interest income and net fee and commission income. In other words, income growth was mostly across the board.

Secondly, net interest income grew 14% year-on-year to S$1.54 billion due to broad-based loan growth (up 10%) and higher net interest margin (up 8 basis points).

Thirdly, total cost-to-income ratio declined from 43.8% a year ago to 43.6% in the reporting quarter. Similarly, total allowance declined by 50% to S$90 million due to absence of specific allowance set aside for non-performing loans (NPLs) from the oil and gas and shipping sectors.

Next, annualised return on equity (ROE) improved to 12.1% from 10.3% a year ago. Similarly, annualised return on asset grew from 0.99% to 1.16%.

Last but not the least, UOB maintained an extremely sound capital position as of 30 June 2018. Its Common Equity Tier 1 capital adequacy ratio (CAR), Tier 1 CAR and Total CAR, as at 30 June 2018, were 14.5%, 16.0% and 18.4% respectively. These ratios were well above the respective regulatory requirement of 6.5%, 8% and 10% respectively.

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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 Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool has a recommendation for United Overseas Bank Ltd.