UOB's profits down 6.2% in 4th quarter
United Overseas Bank (UOB) beat expectations in the fourth quarter, thanks to its capacity to limit damage from souring loans in the beleaguered oil and gas sector.
Net profit for the three months to Dec 31 was down 6.2 per cent from a year earlier to $739 million.
The results were better than the 7.4 per cent profit drop forecast by Reuters.
Net interest income was down 0.1 per cent year-on-year to $1.28 billion, with net interest margin dropping from 1.79 per cent last year to 1.69 per cent.
Non-interest income fell 6.3 per cent to $753 million.
UOB set aside $428 million of specific allowances in the fourth quarter due to non-performing loans (NPL) in the oil and gas and shipping industries, $313 million more than a year earlier.
Its NPL ratio was 1.5 per cent in the fourth quarter, up from 1.4 per cent in the same period last year. But total allowances declined 31.4 per cent to $131 million because UOB set aside reserves or general allowances in previous years that could be drawn when needed.
This was done for the fourth quarter, with some of those reserves partly offsetting the charges on oil and gas NPLs, chief financial officer Lee Wai Fai told a briefing yesterday.
The bank's total exposure to the oil and gas sector amounted to $17.7 billion, with loan risks coming mainly from the $5.3 billion linked to firms in the upstream segment.
UOB chief executive Wee Ee Cheong said the recent hikes in specific allowances mainly came from a decline in the collateral value of existing NPLs.
The overall business outlook is still full of uncertainties, Mr Wee warned, and growth this year is likely to be "modest".
There have been several pockets of expansion for UOB.
Retail business income grew 9 per cent and UOB had a 31 per cent market share in new mortgage sales, "the highest in the market", Mr Wee said.