United Overseas Bank Ltd. reported third-quarter profit that missed expectations, as a decline in trading and investment income combined with a narrowing interest margin to crimp gains from lending and fees. Shares fell. Net income almost tripled to S$1.25 billion ($975 million) for the three months ended Sept. 30 from a year earlier, when the bank set aside its biggest-ever provision for overseas commercial real estate risks, the lender said in a statement Wednesday. Still, that was below the S$1.37 billion average estimate of analysts.
Net fee income grew 19% to S$733 million, driven by expansion in wealth, cards and loan-related activities. Other non-interest income fell 29% to S$370 million from lower trading and investment income. Net interest margin shrank to 1.68% from the preceding period and a year ago, as a result of higher deposit costs. Even so, UOB's net interest income rose 1% to S$2.28 billion. UOB shares fell as much as 5.5% at the start of trading in Singapore, the most since early April last year.
The results show how UOB's wealth business is helping to buoy profit as the bank seeks to add headcount and step up spending to grow services for rich clients. Wealth fees gained 18% to S$258 million from a year ago. Chief Executive Officer Wee Ee Cheong said the bank is broadening its wealth franchise and strengthening its wholesale banking capabilities, and he sees "significant opportunities" ahead to invest for the long term. Assets under management for the retail business totaled S$204 billion, unchanged from the second quarter.
UOB has been active in deal talks this year. It agreed in August to sell its asset management unit to German insurer Allianz SE and is evaluating market interest in a major office development in Singapore's central business district. Chief Financial Officer Leong Yung Chee said loan and fee growth will continue into next year, with operating costs rising by a mid to high single-digit percentage. DBS Group Holdings Ltd. will publish its results on Nov. 5, followed by Oversea-Chinese Banking Corp. the day after.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing