UOB joins DBS, OCBC in growing profit in Q3

SINGAPORE — United Overseas Bank (UOB) Group yesterday reported net profit growth for the third quarter, joining rivals DBS and Oversea-Chinese Banking Corp (OCBC) as all three local banks delivered robust results in a challenging environment.

For the quarter ended Sept 30, UOB reported a 3.3 per cent on-year increase in net profit to S$730 million as higher net interest income and fee income offset lower gains from trading and investment. “The group has achieved another decent set of results this quarter, driven by steady core income and continued growth in our regional franchise,” UOB Chief Executive Wee Ee Cheong said. “This was underpinned by stable margins and healthy asset quality as we stayed disciplined in pursuing sustainable growth.”

Net interest income increased 7.7 per cent to a record S$1.05 billion in the third quarter on the back of a 15.8 per cent on-year growth in gross loans. The net interest margin was unchanged from the previous quarter at 1.71 per cent, reflecting a low interest rate environment that had also pressured margins for other local banks.

However, non-interest income declined 10.9 per cent on-year in the same period to S$618 million, due to market volatilities created by concerns over the tapering of quantitative easing in the US. As a result, trading and investment income declined 17.2 per cent on-year, but the impact was partly offset by a 9.2 per cent rise in fees and commissions. With its latest results, UOB joined OCBC and DBS to report higher earnings amid low interest margins, capital market volatilities and slower economic expansion in the region. Net profit of OCBC and DBS grew 5 per cent and 1 per cent on-year respectively, driven by strong loans growth and higher fee income.

Despite the better-than-expected results, Fitch’s Director for Financial Institutions, Mr Alfred Chan, cautioned that the banking industry is still facing headwinds. He said: “The underlying trends of several indicators of Singapore banks already indicate a deceleration in the growth momentum, if one were to look at the trend over a longer period as opposed to recent quarter-on-quarter comparison.

“For example, loans in the third quarter of 2013 grew by around 2 to 3 per cent from June for the three banks — slower than their first half growth of around 10 to 12 per cent. This, alongside less buoyant operating conditions in the region, is likely to make it increasingly challenging for local banks to sustain their earnings and asset quality, which are presently at their cyclical best.”