Thu, Aug 06, 2020 – 7:49 AM
UPDATED Thu, Aug 06, 2020 – 9:26 AM
UOB on Thursday posted a 40 per cent drop in second-quarter net profit, hurt by weaker income and a surge in provisions.
The board declared an interim dividend of 39 cents per share, down from the year-ago quarter of 55 cents per share. The scrip dividend scheme will be applied. The move is in line with MASs guidance for local banks to moderate their dividends for 2020.
Shares of UOB rose in early morning trading on Thursday, gaining 17 cents to S$19.59 as at 9.24am.
Net profit for the three months ended June 30, 2020 stood at S$703 million, compared with S$1.17 billion the same period a year ago. This is weaker than the consensus forecast of S$814.5 million in net income estimated by four analysts in a Bloomberg poll.
Total income fell 12 per cent to S$2.26 billion, with both net interest income and fee income down. Net interest margin for the quarter stood at 1.48 per cent, a sharp fall from the 1.81 per cent earned on loans a year ago, and the 1.71 per cent earned on loans a quarter ago.
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The one-month Sibor as at Wednesday stood at an all-time record low of 0.25 per cent; the three-month Sibor of 0.438 per cent was at a level not seen since 2014.
Provisions against bad loans in the second quarter surged to S$396 million, compared with just S$51 million a year ago.
The bank's total general provisions as at June 30, 2020 stood at S$2.39 billion, up 20 per cent from S$1.99 billion a quarter ago.
Its regulatory loss allowance reserve (RLAR) set aside as at the second quarter also rose slightly to total S$379 million. RLAR is a separate reserve in equity – in other words, coming out from retained earnings – that can be used to reflect more coverage against non-performing assets. But it does not substitute for provisions deducted against income earned in each quarter. As at the end of the first quarter, UOB had pre-emptively upped RLAR above the minimum requirement to boost allowance coverage.
The non-performing loan ratio in the second quarter stood at 1.6 per cent, up from a year ago's 1.5 per cent, and unchanged from a quarter ago.
Expenses for the second quarter fell 8 per cent from the year-ago period to S$1.04 billion.
The bank's return on equity for the second quarter stood at 7.1 per cent, sliding from 8.8 per cent in the first quarter, and down again from 12.5 per cent in the year-ago quarter.
The bank's CET1 ratio stood at 14 per cent.
In a statement, Wee Ee Cheong, UOBs deputy chairman and CEO said across the region, the group has supported moRead More – Source