Its ASEAN market slowed.
UOB’s 1Q14 results were relatively staid compared to the better-than-expected results of its peers announced earlier.
CIMB noted that as its two rival banks saw the rising spreads from China-related loans boosting NIMs by 5-6bp, UOB flat NIMs looked pale in comparison. Management sees headwinds in its regional markets.
Margins flat, cautious guidance on regional markets NIM fell 1bp as margins in regional markets contracted, dousing the effect of the stable-to-rising margins in Singapore.
A deposits war has broken out in Indonesia and UOB expects its margins there to contract from 4.66% to 4.50% this year. CASA competition in Malaysia is also heating up, and Bank Negara’s hiking of GP requirements will pose as earnings headwinds too.
In Thailand, the economy is at a standstill, necessitating some caution in watching out for emerging NPLs in certainindustries. The sheltered region is the home market, where rising spreads will compensate for falling spreads in the region.
Non-interest income did not fire up UOB’s 1Q14 fee income (-5% qoq) was disappointing. Various fee streams saw qoq declines. Treasury income did not spring a positive surprise either. Whilst its peers saw treasury, trade and loan fees bloom on the back of China-related activity, UOB’s coyness with China trade loans left it shy of a non-NII driver in 1Q, when ASEAN customer flows slowed, and provided no compensating boost.
Not impressive PPOP was within expectations. Provisions were 13% higher, but tax writebacks brought net profit back in line. In a quarter where no China asset quality issues cropped up and peers all had non-NII delivery, UOB’s results look pale in comparison. After ytd outperformance, we reckon it will now lag.
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