United Overseas Bank Ltd (SGX: U11), or UOB, had a great quarter, pushing its half-year earnings up 8% to a record high. Investors should be pleased with the all-run positive headline figures. With that said, here are five things to like about its results.
Solid operating figures
Besides half-year earnings soaring to record highs,second-quarter earnings were up 11% sequentially and 8% from a year ago to S$1.17 billion.
Total income rose 7% from the first quarter, propelled by strong loan growth, higher trading and investment income. This resulted in the bank’s return on equity rising to 12.5%.
It was also heartening to see that both the net interest income and fee income rose from a year ago.
Net interest income and net fee income increased by 7% and 6% respectively. Net interest income was driven by loan growth of 9%, while wealth management services, credit card fees, and loan-related fees bumped up its fee income.
Net interest margin up
The net interest margin (NIM) is the difference between interest on loans and the bank’s cost of capital. UOB managed to reprice its loans upwards in the last quarter, resulting in its NIM rising two basis points to 1.81%.
A higher NIM means the bank can earn more from every dollar loaned out.
Conservative non-performing coverage ratio
The non-performing assets (NPA) coverage ratio is a measure of how well a bank could sustain unexpected losses.
The NPA coverage stood at 84%. While this is down from the 89% recorded in Q1, the unsecured NPA coverage stands at a conservative 191% – well above the 100% mark.
Lastly, the bank rewarded shareholders by increasing its interim dividend by 10% to 55 Singapore cents. However, the bank’s dividend is still fairly well covered with its payout ratio at just 41%.
This means the bank has plenty of headroom to increase its dividend further in the future.
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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 Jeremy Chia doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended the shares of United Overseas Bank Ltd.