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UOB's Q3 net profit slips 7.8% to $791m
Blame it on bad loan charges from O&G firms.
The UOB Group registered net earnings of $791 million, 1.2% lower than the second quarter of 2016. It was 7.8% lower than the third quarter of 2015 as the prior year’s results included one-off gains from sale of investment securities.
The higher specific allowance on loans for the quarter was largely due to the oil and gas and shipping industries, reflecting market developments and in line with the Group’s expectations. However, the broader loan portfolio remains of sound quality. Together with strong general allowance buffer, total credit costs were maintained at 32 basis points.
UOB Deputy Chairperson and CEO Wee Ee Cheong said the group's core earnings demonstrated resilience with selective expansion in lending and fee businesses while asset quality remains manageable.
"We are well-positioned to ride through the cycle with our strong capital and reserves as well as stable funding. Our recent successful issuances of subordinated notes reflect the continued confidence investors have in us," Wee said.
The Group’s capital and funding positions remain strong. Fully-loaded Common Equity Tier 1 Capital Adequacy Ratio (CAR) improved to 12.4% due to disciplined growth coupled with a strong take-up rate for scrip dividend.
Net interest income was stable at $1.23 billion as the decrease in net interest margin of 8 basis points to 1.69% was offset by a healthy year-on-year loan growth of 7%. Non-interest income decreased 4.7% to $810 million. Fee and commission income grew 1.6% to $492 million on higher contributions from credit card and fund management income. Trading and investment income declined 19.3% to $251 million, as 3Q15 included one-off gains from sale of investment securities, partly offset by higher net trading income.
Total expenses increased 1.6% from a year ago to $918 million due to higher revenue and IT-related expenses. Expense-to-income ratio was 45.0%.
Total allowance was $185 million in 3Q16, 15.7% higher than $160 million a year ago. The increase in specific allowance in loans in the quarter came largely from the oil and gas industry. Total credit costs were maintained at 32 basis points with general allowance strong at S$3 billion as at the end of the quarter.
Looking forward, the group expects subdued global economic growth and volatile market conditions in the months ahead.
"But ASEAN’s fundamentals remain sound, with fiscal flexibility to support domestic growth. As a long-term player, we see pockets of opportunities and will continue to support our customers with our strong balance sheet and regional network. We will continue to invest in our capabilities, backed by our belief in the region’s underlying prospects and our ability to deliver sustainable value for shareholders,” Cheong said.
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