United Overseas Bank (UOB) has reported a 43% y-o-y growth in earnings of $1.0 billion for the 2QFY2021 ended June, bringing its total net earnings for the 1HFY2021 to $2.0 billion, 29% higher than earnings of $1.56 billion for the corresponding period the year before.
See: UOB Kay Hian predicts DBS and OCBC to post net profit of $1.54 bil and $1.20 bil in 2Q21
The higher earnings were supported by stable net interest margin (NIM), record fees and lower credit allowance.
Earnings per share (EPS) for the 1HFY2021 stood at 2.35 cents on a fully diluted basis, from 1.86 cents in the 1HFY2020.
For the half-year period, the bank has declared an interim dividend of 60 cents per share, translating to a dividend payout ratio of 50%, the same as that of 2019.
The higher dividend comes amid the recent lift in dividend cap by the Monetary Authority of Singapore (MAS). UOB CFO Lee Wai Fai also previously promised that the bank would resume its 50% payout ratio once the dividend cap was relaxed.
In addition, UOB has announced the suspension of its scrip dividend scheme.
The dividend will be paid in cash on Aug 27.
Post-dividend, the group says its balance sheet remains in a “solid” position.
In the 2QFY2021, net interest income (NII) grew 8% y-o-y to $1.58 billion due to robust loan growth of 6% and an eight-basis point y-o-y increase in net interest margin (NIM) to 1.56%.
Net fee and commission income grew 34% due to strong growth in wealth management, loan-related and fund management fees.
Other non-interest income fell 32% y-o-y to $243 million mainly attributable to a drop in non-customer-related gains.
Trading and investment income fell 38.1% y-o-y and 26% q-o-q to $182 million due to the higher gains on investments seen in the 1QFY2021.
The bank’s cost-to-income ratio improved from 46.0% to 43.7% in the 2QFY2021.
Non-performing loan (NPL) fell 0.1 percentage points y-o-y and remained stable q-o-q at 1.5% for the 2QFY2021, with total credit costs normalising to 24 basis points from 52 basis points.
Loan-to-deposit ratio was stable at 86.9% in the quarter.
During the quarter, the bank posted a 3.1% y-o-y increase in its current account savings accounts (CASA) ratio of 52.7%.
Gross loans during the 2QFY2021 stood 6% y-o-y higher at $299 billion.
Total allowance during the quarter was more than halved to $182 million as most of the pre-emptive allowance was taken in the year before.
Net interest income (NII) for the 1HFY2021 grew 2% y-o-y to $3.11 billion. This was led by healthy loan growth of 6%, and offset by the four-basis point y-o-y decline in NIM of 1.56%.
1HFY2021 net fee and commission income rose 28% y-o-y to a new record high of $1.23 billion on the back of record wealth management fees due to returning investor confidence on the market recovery.
Loan-related fees increased by 33% y-o-y due to increased trade and investment transactions.
Total expenses for the 1HFY2021 stood stable at $2.15 billion.
In the 1HFY2021, the cost-to-income ratio improved from 45.6% to 43.8%.
Total allowance fell to $383 million from $682 million a year ago.
As at June 30, the bank’s Common Equity Tier-1 ratio (CET-1) ratio stood at 14.2%, remaining well above the regulatory requirement of 6.5%.
Leverage ratio of 7.4% was over two times the regulatory requirement of 3%.
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As of end-June, cash and cash equivalents stood at $31.91 billion.
“Our diversified customer franchise and investment in digital capabilities have enabled us to deliver another strong set of results. We achieved a 29% increase in 1HFY2021 profit, driven by healthy contributions from our core businesses and resilient asset quality. Our performance was underpinned by our proactive and focused support for our customers in their businesses and investments,” says Wee Ee Cheong, deputy chairman and CEO of UOB.
“Our robust balance sheet and strong capital and liquidity positions also enable us to support our customers in capturing new opportunities arising from the growth momentum in Greater China and developed markets,” he adds.
“We are accelerating our digital agenda to provide progressive solutions in anticipation of their business and personal financial needs. With countries speeding up their vaccination drive, we are optimistic that the situation will gradually pick up in Southeast Asia. In forging a sustainable future with our customers across the region, we remain committed to working with governments across the region to provide affected customers, especially small- and medium-sized enterprises, with liquidity support to see them through these tough times.”
Shares in UOB closed 28 cents lower or 1.1% down at $25.85 on Aug 3.
