UOB reports 1QFY2024 net profit of $1.49 billion, up q-o-q but down y-o-y and 6.4% above estimate

UOB announces net profit of $1.49 billion including Citi integration costs, higher q-o-q, lower y-o-y, and 6% above estimates.

United Overseas Bank (UOB) reported a core net profit of $1.57 billion for the 1QFY2024 ended March 31. Net profit including the one-off integration cost for the Citi acquisition of $1.49 billion was up 6% q-o-q but down 2% y-o-y. Despite this, net profit came in above the Street's $1.4 billion estimate as indicated by Bloomberg.

The beat was underpinned by trading and investment income, and higher net fee income, a trend that echoed DBS Group Holdings' 1QFY2024 results. Net interest income (NII) fell 2% y-o-y and q-o-q to $2.36 billion. Net interest margin (NIM) of 2.02% in the first quarter was unchanged q-o-q but down by 12 basis points y-o-y. Cost-to-income (CIR) ratio of 41.9% was lower q-o-q but up 1 percentage point y-o-y.

Specific allowance declined from lower new non-performing loans in 1Q, but total allowance increased to $163 million mainly due to the release of general allowance in the previous quarter.

Non-performing loans (NPL) ratio was unchanged at 1.5% q-o-q but lower y-o-y. In a press release, UOB said it maintained prudent levels of general allowance on loans, with performing loans coverage at 0.9%. The non-performing assets coverage stood at 99% or 204% after taking collateral into account. These levels are below that of DBS's.

Common equity tier 1 (CET-1) rose 50 bps q-o-q to 13.9%. UOB announces dividends every half year and has committed to a 50% payout ratio subject to a minimum CET-1 ratio of 12.5% to 13.5%.

"Amid an uncertain global environment, UOB delivered a stable set of results for the first quarter backed by our strong balance sheet and liquidity position. Our core business franchise performed well, with higher fee income and record trading and investment income," says UOB's deputy chairman and CEO Wee Ee Cheong. "Despite heightened geopolitical tensions, our home region of Southeast Asia is relatively resilient. We continued to see ongoing shifts in global supply chains and sustained tourism activities. Our extensive regional footprint, enlarged customer franchise and enhanced capabilities put us in a good position to ride on the region’s economic growth."

"Our Citigroup integration is progressing well. We recently successfully migrated customers in Thailand to our UOB platform following the smooth transition in Malaysia and Indonesia last year. Next year, we will complete the integration in Vietnam. So far, our focus on cross-sell synergies is starting to gain good traction. With our stronger customer base and regional value proposition, we will continue to expand our offerings and deepen our capabilities to meet the needs and aspirations of our customers," he adds.

Shares in UOB closed 1 cent lower or 0.03% down at $30.55 on May 7.

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