SINGAPORE – UOB reported on Friday (July 29) solid growth in second-quarter earnings amid rising interest rates that boosted its margins.
Net profit for Singapore’s third-biggest local bank came in at $1.11 billion for the three months to June, up 11 per cent from a year ago and ahead of the $1.095 billion forecast by analysts in a Bloomberg poll.
The latest earnings reversed a 10 per cent dip in the first quarter that was due to lower fee income.
UOB declared an interim dividend of 60 cents per ordinary share, representing a payout ratio of approximately 50 per cent.
Chief executive Wee Ee Cheong said the bank has delivered stable profits buoyed by higher-than-expected net interest income driven by rising interest rates and active balance sheet management.
“This rising interest rate environment is set to further boost our margins for the year,” he said.
Net interest income rose 18 per cent year on year to $1.9 billion amid a strong improvement in the bank’s margin and healthy loan growth, said UOB.
Net interest margin – a key gauge of banks’ profitability – rose 11 basis points to 1.67 per cent and loans grew 8 per cent.
However, net fee and commission income fell 3 per cent to $567 million as record credit card and loan-related fees were offset by lower wealth and fund management fees on the back of weaker market sentiment.
Other non-interest income rose 6 per cent on higher customer-related treasury income.
Total allowances fell to $137 million, largely due to lower general provisions set aside for bad loans, said UOB.
The bank’s net profit was up 23 per cent from the $906 million it raked in in the first quarter. Its earnings for the first half of the year were flat at $2.02 billion compared with the same period last year.
UOB’s results kicks off earnings season for local lenders. OCBC will report its earnings on Aug 3, and DBS on Aug 4.