UOB on Feb 23 announced that its FY18 earnings have reached a record high of $4.01 billion, 18% higher than the previous year, with total income recoding a 6% y-o-y rise to $9.12 billion.
For 4Q18, earnings was 7% higher y-o-y at $916 million, but was 12% lower q-o-q.
The bank also declared final and special dividends totalling 70 cents.
See: UOB reports record earnings of $4.01 bil for FY18; declares final and special dividends totalling 70 cents
Loan growth for 4Q18 was 3% higher q-o-q and 11% higher y-o-y, while NIM came in at 1.80%, 1 basis point (bp) lower q-o-q.
In an analyst briefing, UOB has lowered its loan growth guidance from mid-to-high to mid-single digit, in view of macroeconomic conditions.
Meanwhile, cost-to-income ratio is expected to remain stable at 44% in the near term as it continues to drive cost-to-income ratio lower on digitalisation and cost efficiencies.
The bank continues to see some upward bias for NIM in FY19 amid challenging markets as regional markets’ margins continue to face pressure from higher cost of funds. Lim believes that a bright spot could come from mortgages where there may be room to price up further.
Despite the slower growth environment, UOB expects higher credit costs of 20-25 bps.
In particular, the higher credit costs seen in 4Q18 was due to some chunky cases in Singapore and Malaysia across various sectors including Coastal Oil’s exposure (which has been fully provided for). The bank has also written off some older oil and gas loans during the quarter.
UOB also said that regulators are still investigating Evergrowing books, and its management team has also changed. UOB believes that the progressive changes are in the right direction.
UOB had mentioned in previous quarters that it does not expect significant impact on its books as the bank took a significant discount to Evergrowing’s net tangible assets when valuing the investment on its books.
As at 12.10pm, shares in UOB are trading at $25.39 or 1.1 times FY19 book with a dividend yield of 4.9%.
