UOB posts 1.7% profit rise on strong loan growth

SINGAPORE — United Overseas Bank (UOB), the smallest of Singapore’s three lenders, yesterday reported a 1.7 per cent rise in fourth-quarter net profit, following rivals DBS Group and Oversea-Chinese Banking Corp in riding on strong loan growth, but it likewise had to make more provisions for bad debt.

For the three months ended Dec 31, UOB earned net profit of S$786 million, up from S$773 million in the corresponding period a year earlier and above an average forecast of S$759 million by analysts polled by Reuters.

Net interest income grew 6.7 per cent to S$1.17 billion in the quarter, driven by robust loan growth, but this gain was partly offset by a dip in its net interest margin, or the gap between lending rates and funding costs, by 5 basis points to 1.69 per cent. Non-interest income jumped 5.4 per cent to S$682 million, helped by increases in fee income as well as gains from trading and investment.

For the full year, UOB made S$3.2 billion in profit, up 8 per cent from the previous year, while total income rose 11 per cent to a record S$7.5 billion. The bank’s outstanding loans climbed 9.5 per cent to S$195.9 billion from S$178.9 billion a year earlier.

UOB said impairment charges rose 19.9 per cent in the fourth quarter from the previous corresponding period to S$166 million, mainly due to soured individual loans in Singapore and Malaysia as well as provisions to take into account the larger loan book. Total impairment charges for the year were S$635 million, an increase of 48.1 per cent.

“We are now operating in an environment where heightened volatility is the new norm,” said UOB chief executive Wee Ee Cheong. Total exposure to the embattled oil and gas sector, however, makes up less than 5 per cent of the portfolio, he added.

UOB also gave an update on its lawsuit against a Lippo Group subsidiary and seven individuals for allegedly misleading the bank into making inflated loans for the purchase of 38 units at Marina Collection in Sentosa. UOB last month sued to recover S$181 million after 37 of the loans defaulted.

UOB chief financial officer Lee Wai Fai said the bank would “recover in full” the bad debt and, in the meantime, would manage the units for rental.

For the year ahead, Mr Wee expects UOB to achieve 5 to 10 per cent loan growth, but he is seeking to earn more from the existing pool of customers by providing other services such as wealth management.

“We are focusing not just on loans, but on overall total profitability ... What we want to do is provide solutions to customers, to see how we can actually take full advantage of our existing customer base, rather than grow new loans, to improve our collaboration income,” he said.

Assets under management for UOB’s wealth management unit will grow to S$100 billion in the next one to two years, from around S$80 billion now, he said. “Wealth management will be a growth engine. As the needs of our retail customers grow … we are sharpening our focus on private banking,” he said.

Sticking to organic growth, UOB is not looking for acquisitions over the next one to two years, Mr Wee said, adding that the time was not right. The bank will also seek to raise productivity by stepping up digital initiatives and automation at its branches, he added.

UOB shares ended 0.7 per cent higher at S$23.57 each after the earnings announcement.