Published May 7, 2009

BANK EARNINGS
UOB Q1 profit of $409m better than expected

Shares soar 13% to $14.88; NPL only marginally up from Q4 last year

By SIOW LI SEN
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UNITED Overseas Bank (UOB) shares soared 13.1 per cent yesterday to $14.88 after it posted better than expected first-quarter net profits.

Mr Wee: Bank benefited from the industry's 'back to basics' move

The non-performing loan ratio was up just marginally from the preceding quarter.

'There are no major signs of deterioration and the group remains comfortable with its overall portfolio,' UOB said in a press statement.

UOB was the top stock performer in the 30-stock Straits Times Index yesterday after it reported net profit of $409 million for the three months ended March 31, down 22.7 per cent from the year-ago comparative period as loan impairment charges quadrupled to $378 million from Q108's $89 million.

Bloomberg said that six analysts had a mean estimate net profit of $384 million.

UOB shares are now up 84 per cent from its year-low of $8.07 recorded in March.

OCBC Bank, which reported a 12 per cent fall in first-quarter net profit to $545 million, saw its stock rise 4.6 per cent to $6.80. DBS Group Holdings, which releases results tomorrow, gained 8.1 per cent to $11.74.

More significant, against the preceding quarter, UOB's net profit was up 23.3 per cent, mainly due to higher investment income and fee and commission income.

Closely watched non-performing loans (NPL) rose marginally, to 2.1 per cent from 2 per cent at end-2008. UOB had worried investors when its NPL ratio rose the fastest among the three local banks in the preceding quarter when it went to 2 per cent from 1.5 per cent.

The NPL ratio at both DBS and OCBC in Q4 rose to 1.5 per cent, from 1.3 per cent previously. In the fourth quarter of last year, all three local banks reported more bad loans and warned that the situation would get worse.

UOB chief executive Wee Ee Cheong said that the bank 'achieved a decent set of results for the first quarter, benefiting from the industry's move towards 'back to basics'.'

'The bank will stay disciplined and ensure our balance sheet and core franchise remains strong.'

UOB said that Q1 net interest income fell slightly from Q4 to $949 million due to a shorter quarter. It was up 11.4 per cent year-on-year on the back of loan growth and lower funding costs.

Net interest margin fell four basis points from Q4 to 2.41 per cent due to lower average loan spread from some overseas centres. From a year ago, net interest margin was up 21 basis points, largely due to lower funding costs.

'Singapore margins remain strong,' said a bank spokeswoman, adding that the bank still expects to see 'good net interest margin performance for 2009'.

Net customer loans came to $99.7 billion, marginally down from Q4 and up 5.6 per cent from Q1 2008, largely from higher housing loans and loans to professionals and individuals.

Non-interest income was up 11.1 per cent at $434 million from the preceding quarter.

UOB said that Q1 total expenses fell 7.7 per cent to $491 million from Q4 due to lower headcount and a grant from the Jobs Credit Scheme.

'The core trends were very good in the first quarter,' JPMorgan & Chase Co analyst Harsh Wardhan Modi said in a Bloomberg report.

'The fact that credit quality didn't deteriorate significantly during the quarter bodes well for 2009 credit cost and restores a degree of confidence in underwriting standards at the bank.'