UOB likely in focus after reporting earnings broadly in line with forecasts

UOB branch at Raffles Place, SingaporeUOB branch at Raffles Place, Singapore. Photo taken pre-Covid.

Shares of UOB are likely to be in focus after it reported net profit that was broadly in line with expectations, but it may disappoint market hopes it would beat forecasts like its peer DBS.

Net profit for the first quarter rose 21 percent on-year to S$978 million, the smallest of Singapore’s three banks said in a filing to SGX before the market open.

The net interest margin was 1.84 percent, up 11 basis points, on higher loan margin and interbank yields amid a rising interest rate environment and proactive balance sheet management, UOB said.

That compared with market expectations for net profit of around S$981 million for the quarter.

Daiwa had forecast net profit of S$955 million, up 18 percent on-year, expecting NIM of 1.81 percent. CIMB had forecast net profit of S$948 million, with NIM of around 1.84 percent. Nomura on Wednesday had forecast net profit of S$994 million, with NIM of 1.83 percent, but added that quarterly net profit might rise as high as S$1 billion for the first time.

“Against a backdrop of an improving operating environment and a pick-up in customers’ activities, we achieved our strongest quarter ever, with double-digit percentage earnings growth,” Wee Ee Cheong, UOB’s deputy chairman and CEO, said in the statement. ““With the more benign environment and issues in the oil and gas segment largely addressed, our non-performing loan ratio and credit costs improved.”

The stock could struggle to post further gains as it is already up more than 13 percent so far this year, despite slipping 0.5 percent on Wednesday to close at S$29.99.

However, Nomura said in a note on Wednesday that UOB’s upside potential was still attractive at around 15 percent, including the dividend yield. That compared with DBS nearing full valuation and OCBC being fairly valued it said.

Shares of UOB ended Wednesday down 0.50 percent at S$29.99.