United Overseas Bank (UOB) has reported a net profit of $1.11 billion for the 2QFY2022 ended June, 11% higher than the net profit of $1.0 billion reported in the same period the year before.
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The higher y-o-y earnings were due to the expanded margins and the recovery in trading and investment income.
The quarter’s earnings brought the bank’s earnings for the 1HFY2022 to $2.02 billion, 0.35% higher than the $2.01 billion reported in the year before.
The higher net profit was attributable to the strong growth in NII with stable credit card allowance and partially offset by lower gains from investments securities amid the volatile markets.
Earnings per share (EPS) for the 1HFY2022 stood at $2.36 on a fully diluted basis.
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The bank has declared an interim dividend of 60 cents per share, unchanged from the year before, representing a payout ratio of 50%.
The dividend will be paid in cash on Aug 22.
“We have delivered stable profits buoyed by higher-than-expected net interest income driven by rising interest rates and our active balance sheet management. This rising interest rate environment is set to further boost our margins for the year,” says Wee Ee Cheong, deputy chairman and CEO of UOB.
“We continue to see economic activity picking up as borders reopen and investment flows resume. In Singapore, consumer sentiment is holding up well and employment is strong. Institutional and private wealth inflows remain steady given the country’s safe haven and regional hub status. As such, while the aggressive rate increases around the world are going to put a damper on global growth, we remain fairly optimistic of the resilience of our key markets in Southeast Asia.
“The long-term potential of our region remains bright. Backed by our strong balance sheet, healthy capital and liquidity positions and prudent approach, we are well-positioned to navigate the near-term headwinds with our customers and the community,” he adds.
2QFY2022
During the quarter, net interest income (NII) increased by 18% y-o-y to $1.69 billion thanks to the higher net interest margin (NIM) and loan growth.
In the 2QFY2022, NIM grew by 11 basis points y-o-y to 1.67%.
Loans grew at a “healthy” pace of 8%.
Net fee and commission income fell by 3% y-o-y to $283 million as the new high for credit card and loan-related fees were more than offset by the lower wealth and fund management fees. Credit card fees during the quarter came in at a new high as customer spend increased in tandem with the reopening of borders, although wealth fees dipped on the back of more subdued market sentiments.
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In the 2QFY2022, other non-interest income increased by 6% y-o-y on higher customer-related treasury income.
Trading and investment income increased by 9.18% y-o-y to $214 million due to the strong momentum for customer-related income as hedging demand increased, while others normalised from the last quarter’s short-term impact on hedges and unrealised mark-to-market on investments.
Total income for the quarter increased by 12% y-o-y to $2.70 billion.
Total expenses also increased by 12% y-o-y to $1.18 billion in line with the higher income.
As a result, operating profit for the 2QFY2022 increased by 12% y-o-y to $1.52 billion.
Total allowance in the 2QFY2022 fell to $137 million largely due to lower general allowance.
In the 2QFY2022, the bank’s cost-to-income ratio improved by 0.1 percentage points y-o-y to 43.8%.
Non-performing loan (NPL) ratio grew by 0.2 percentage points y-o-y to 1.7%, although asset quality remained “resilient”.
Loan-to-deposit ratio increased by 1.8 percentage points y-o-y to 88.7% in the quarter.
During the period, the bank saw in its current account and savings account (CASA) ratio of 54.7%, up by 2.0 percentage points y-o-y.
1HFY2022
In the 1HFY2022, NII increased by 14% y-o-y to $3.5 billion as NIM rose 7 basis points. Loan growth for the half-year period was also at a healthy 8%, which was mainly attributable to an increase in working capital loans and mortgages.
During the period, net fee and commission income stood 5% lower y-o-y at $1.1 billion as wealth and fund management fees dipped due to cautious investors on the back of market uncertainties.
Loan- and trade-related fees, on the other hand, stood at a new high due to higher business demand for trade and investment opportunities.
Credit card fees, again, stood at record levels as consumer spending rose with the resumption of travelling and the reopening of borders.
In the 1HFY2022, customer-related treasury income grew by 9% y-o-y as more customers opted to hedge their exposures.
The bank’s non-interest income, however, fell by 37% y-o-y to $374 million due to the large gains from bond sales in the same period the year before. The lower non-interest income was also due to the lower valuation on investments in a bearish market.
In the 1HFY2022, total income increased by 3% y-o-y to $5.06 billion.
Total expenses increased by 4% y-o-y to $2.24 billion in line with the higher total income.
As a result, operating profit grew by 2% y-o-y to $2.82 billion.
In the half-year period, UOB’s total allowance fell by 18% y-o-y on lower general allowances while specific allowance was higher due to downgrade of a major but non-systemic corporate account.
Total credit costs on loans were at 20 basis points, in line with expectations.
As at June 30, the bank’s Common Equity Tier-1 (CET-1) ratio stood at 13.1%, down 1.1 percentage points y-o-y, but still well above the regulatory requirement of 6.5%.
Leverage ratio fell 0.8 percentage points to 6.6%, remaining above the regulatory requirement of 3%.
Cash and cash equivalents as at June 30 stood at $42.49 billion.
Shares in UOB closed 26 cents higher or 0.93% up at $28.26 on July 28.
