UOB shares gain as record profit tops analyst estimates
By Chanyaporn Chanjaroen
(Bloomberg) — United Overseas Bank Ltd.’s shares rose the most in more than seven months after profit topped estimates in the third quarter, driven by rising interest rates and loan growth.
Net income rose 34% to a record S$1.4 billion (US$955 million) from a year earlier in the three months ended Sept. 30, Southeast Asia’s third-largest lender said Friday. That compares with the S$1.19 billion average estimate of five analysts surveyed by Bloomberg.
UOB shares climbed 3.8%, the biggest gain since March 16.
Chief Executive Officer Wee Ee Cheong said in a statement that the global economic outlook remains challenging, though he expects Southeast Asian economies to show resilience and avoid a recession. The mortgage business is ‘steady’ despite rising rates in Singapore and he is positive for the bank’s earnings outlook in 2023, Wee said separately at a results presentation.
UOB joins banks including Standard Chartered Plc and HSBC Holdings Plc that are seeing lending revenue benefit from higher interest rates even amid a cloudier economic outlook across parts of Asia. In Singapore, rising price pressures have prompted the nation’s central bank to tighten monetary policy settings repeatedly.
UOB’s net interest income rose 39% to S$2.2 billion in the quarter, led by margin expansion and loan growth, while total allowances fell 36%.
For the fourth quarter, the bank said it sees net interest margin, a gauge for lending profitability, expanding to above 2%, and to remain at that level in 2023. That compares with 1.95% in the third quarter.
UOB is in an expansion mode after agreeing in January to spend about S$4.9 billion buying consumer assets of Citigroup Inc. in four countries. The Singapore lender will complete the takeover in Thailand and Malaysia on Nov. 1, with Vietnam and Indonesia to be wrapped up by the end of next year, the bank said. Around 90% of the US bank staff from the units have agreed to move to UOB, it said. The full earnings benefit will be reflected in 2024, chief financial officer Lee Wai Fai said.
Credit costs are expected to be higher at 20-25 basis points next year, Wee said, mainly due to unsecured assets - including loans - that UOB will acquire from Citi.
The beat “paints a positive picture for the bank’s next 3-6 months,” said Bloomberg Intelligence analyst Sarah Jane Mahmud. The outlook will be strengthened by the acquisition of Citi’s regional retail assets, she said.
Larger rivals DBS Group Holdings Ltd. and Oversea-Chinese Banking Corp. are due to report next week.
Other key details:
Net fee and commission income fell 10% to S$519 million
Expenses rose 27% to S$1.36 billion, in line with income growth and strategic investments
Non-performing loan ratio stood at 1.5%, lower than the previous quarter and unchanged from a year ago
© 2022 Bloomberg L.P.
