Net interest income drove earnings up and sharply grew by 14% to $1.6b.
Singapore's UOB continued to enjoy a strong profit trajectory after earnings for the third quarter climbed 17% YoY to $752.28m (S$1.04b) on the back of higher earnings in net interest income (NII), which grew 14% to S$1.6b.
The bank's net interest margin (NIM) of 1.81% fell 2bps from last month but rose 2bps from last year. Overall yields rose 7bps QoQ to 3.31%.
According to RHB Research, this was more than offset by the rise in deposit costs. “However, a 2% QoQ loan expansion was positive,” analyst Leng Seng Choon said.
The bank’s fee and commission income rose 2% YoY but fell 3% QoQ. The quarterly weakness was caused by loan-related fees that fell 9%. Moreover, net trading income slipped 19% and contributed to the weakness.
Total credit cost hit 18bps, lower than last year’s 13bps but higher than last month’s 13bps. “Credit costs eased in a benign credit environment,” the bank said in a statement.
According to Leng, the bank has the potential for more future dividends. “The 3Q2018 CET1 capital adequacy ratio (CAR) of 14.1% may be lower than 2Q2018’s 14.5%, but is higher than its two peers’ 2Q18 average of 13.4% – this points to the potential for UOB to dish out more dividends going forward, although no dividend was declared for 3Q2018.”
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