SINGAPORE (May 6): UOB Group reported earnings of $855 million for 1QFY2020 ended March, some 19% lower than earnings of $1.05 billion a year ago.
The group says the decline was primarily attributable to declining interest rates and higher credit costs.
Notably, UOB has set aside some $546 million to strengthen allowance coverage amid the global pandemic and weak macro conditions. The group booked an impairment charge of $286 million, more than double that of $93 million in the previous year. Additional regulatory loss allowance reserve for the quarter, too, increased five-fold to $260 million.
The group's total income remained flat y-o-y at $2.4 billion for the quarter under review, despite lower interest rates, and slower business momentum towards the end of the quarter due to the Covid-19 pandemic.
Net interest income was flat at $1.59 billion y-o-y, which was offset by margin compression, and a healthy loan growth of 4% for the quarter. Net interest margin fell slightly at 0.05 percentage points q-o-q to 1.71% for 1Q2020.
Meanwhile, fee income rose 8% to $515 million, spearheaded by growth in loan-related and wealth management fees, while credit card fees declined. Trading and investment income fell 17% to $224 million amidst increased market volatility.
Other non-interest income fell 1% y-o-y, but rose 2% q-o-q on the back of loan-related and wealth management fees, with relatively flat treasury and investment income.UOB, along with DBS and OCBC, also have a combined exposure of at least US$600 million to troubled oil trader Hin Leong trading.
UOB’s Common Equity Tier 1 (CET1) ratio declined 0.2 percentage points q-o-q to 14.1%, but remains within its target range as well as regulatory requirements. According to the group, this deems it "well-prepared" to steer through the macro uncertainties ahead.
In a Wednesday statement, UOB deputy chairman and CEO Wee Ee Cheong says the bank has been “working closely with government agencies and central banks to provide liquidity support to individuals and businesses”.
“In times such as these, we ensure our balance sheet remains strong and our capital and liquidity positions robust, so we can continue to support our customers through the roughest of cycles and crises, just as we have done so over the past eight decades," says Wee.
"Coupled with our strengthened allowance coverage and through our collective efforts with all our stakeholders, we are confident that we will ride through these extraordinarily difficult times and emerge stronger,” he adds.
UOB has been supporting its stakeholders extensively during Covid-19 in initiatives including a $3 billion liquidity relief programme. It has also assisted over 1 million businesses and individuals with several loan relief schemes.
See also: UOB loans $4 bil to mid-sized enterprises affected by Covid-19
Shares in UOB closed 9 cents higher or up 0.5% at $19.90 on Tuesday prior to the announcement.
