UOB’s Q3 profit falls 7.8% as soured assets rise

SINGAPORE - United Overseas Bank (UOB), Singapore’s and Southeast Asia’s third-largest lender, said on Friday (Oct 28) its third-quarter profit fell 7.8 per cent from the corresponding period a year earlier, as it set aside higher provisions for soured loans to the struggling oil and gas industry.

Net income fell to S$791 million in the three months to September from S$858 million a year earlier, when the bank had a one-off gain from the sale of investment securities, UOB said in its pre-market filing with the stock exchange. The result was slightly better than the S$771 million average forecast in a Bloomberg survey of five analysts. While net interest income was little changed, provisions for bad assets increased by almost 16 per cent to S$185 million, UOB said.

UOB shares fell as much as 2.9 per cent to S$18.40 before clawing back some losses to end the day 1.6 per cent lower at S$18.63. The benchmark Straits Times Index closed down 0.5 per cent.

Singapore bank profits have come under pressure this year from a weakening domestic economy and from increased charges for loan losses tied to the oil and gas services industry, which has been hurt by the slump in energy prices. UOB’s specific provisions for Singapore loans surged to S$217 million, from S$15 million a year ago.

“I am concerned that the bank’s special allowance for loans jumped that much. We expect to see a gradual increase in specific provision, but not a jump,” said Mr Jeremy Teong, an analyst at Phillip Securities.

Non-performing assets at UOB rose 33 per cent to S$3.6 billion as of end-September, compared with a year earlier, mirroring a similar rise at its larger Singaporean competitor Oversea-Chinese Banking Corp.

“We expect subdued global economic growth and volatile market conditions in the months ahead,” Chief Executive Officer Wee Ee Cheong said in a statement accompanying the results. “But ASEAN’s fundamentals remain sound, with fiscal flexibility to support domestic growth,” he added.

Among the key figures in UOB’s third-quarter report card, net interest income fell 0.4 per cent to S$1.23 billion from a year earlier; fee and commission income rose 1.6 per cent to S$492 million; net customer loans rose 7 per cent to S$213.5 billion; net interest margin fell to 1.69 per cent from 1.77 per cent year earlier; and the non-performing loans ratio rose to 1.6 per cent from 1.3 per cent. - BLOOMBERG