UOB Meets Forecasts With 8.2% Rise In Q3 Profit

Source : The Business Times, October 31, 2007

Loans grow 15.6% from a year ago to $85.2b but just 3.3% since end-June

UNITED Overseas Bank's third-quarter net profit rose 8.2 per cent to $501 million from a year ago, broadly in line with analysts' expectations.

Mr Wee: Despite uncertainties in the financial market, our core business remains strong

Compared with the second quarter, net profit for the three months ended Sept 30 fell 14.4 per cent, mainly due to lower trading and investment income resulting from mark-to- market losses from widening credit spreads triggered by the US sub-prime crisis, said the group.

'The negative credit impact should reverse once the market regains its confidence or when the debt securities mature,' it said.

The Q3 net profit fell below the mean forecast of $516 million by analysts polled by Reuters, but beat the $480 million median estimate of analysts surveyed by Bloomberg.

Annualised basic earnings per share for the quarter was 129.3 cents, up 9.1 per cent from a year ago.

For the first nine months of the year, the group's net profit fell 21.2 per cent to $1.6 billion from the previous corresponding period's $2.03 billion, which included a one-time gain of $689 million comprising a special dividend from Overseas Union Enterprise (OUE) and gains from divestment of OUE and Hotel Negara.

Excluding the one-time gain, nine-month net profit rose 19.2 per cent. Nine-month total income was 19.7 per cent higher at $3.6 billion.

Net customer loans grew 15.6 per cent from a year ago to $85.2 billion at end-September, but just 3.3 per cent since the end of June.

Rival DBS Group, which reported its earnings last Friday, saw its net customer loans grow 22.8 per cent from a year ago and 5.8 per cent over the quarter to $104.7 billion at end-September. But UOB saw more rapid growth than DBS over both periods in housing loans - the largest component of the banks' loan books by industry sector, comprising a quarter of total customer loans.

UOB said there had been 'no change' to its position in collateralised debt obligations or CDOs compared with the second quarter.

Total direct investments in CDOs by the group remains at $388 million, after adjusting exchange translation. None of these is in default, it said.

The group made an additional provision of $20 million for these CDO investments, bringing its total provision to $55 million. Another $46 million provision for mark-to-market losses was taken to the bank's reserves.

CDO investments managed on behalf of clients by UOB Asset Management (UOBAM) - the bank's asset management arm - dipped slightly to $11.4 billion from $11.7 billion in the second quarter. The decline was mainly due to the maturity of a CDO and currency translation effects, said the group.

Among the CDO investments managed by UOBAM, one CDO tranche had its credit rating downgraded in September and another this month. A third tranche was upgraded this month.

And last week, four tranches of a CDO launched by UOBAM late last year, Raffles Place II Funding Ltd, were put on negative watch by ratings agency Standard & Poor's. The four tranches had a combined principal value of US$57 million when first launched. UOBAM itself does not own any CDOs, including any tranches in Raffles Place II Funding.

Group chief executive Wee Ee Cheong said he was 'pleased' with the results achieved. 'Despite uncertainties in the financial market, our core business remains strong.'

Net interest income for the quarter rose 4.4 per cent over the year to $714 million. But compared to the second quarter, it was down 6.2 per cent.

The fall was due to the weakening of regional currencies against the Sing dollar and narrower interest margins as the group moved more of its funds into short-term investments 'in view of the volatile and uncertain market conditions'.

Its net interest margin fell to 1.93 per cent, down from 1.97 per cent a year ago and 2.04 per cent in the second quarter.

Non-interest income for the quarter was $393 million, up 16.5 per cent from a year ago but 26.7 per cent lower than in the second quarter.

Its share price fell after the earnings release at mid-day, ending the day 50 cents or 2.3 per cent lower at $21.50.

Get the link to UOB's financial results at www.businesstimes.com.sg

Related Link :-

http://tinyurl.com/ywos6e
UOB's news release

http://tinyurl.com/2gav68
Financial results