Singapore's second-biggest lender by assets, United Overseas Bank, posted a below expected 8.2 per cent rise in quarterly profit, despite strong loan growth.
UOB said that trading and investment income was hurt by mark-to-market losses from widening credit spreads triggered by the US sub-prime crisis.The bank reported net profit of $501 million (US$345.3 million) for the July-September period, up from $463 million a year ago, but lower than a mean forecast of $516 million by five analysts polled by Reuters Estimates.
Loans grew at a double-digit pace fuelled by a property and construction boom, but the bank said it suffered from a lower contribution from interbank money market trading, a stronger Singapore dollar and mark-to-market losses on debt securities. 'The negative impact should reverse once the market regains confidence or when the debt securities mature,' it said.
Investors were hoping for a better result after DBS Group Holdings, South-east Asia's biggest lender, beat market expectations by posting an 11 per cent rise in quarterly profit on strong loan and fee growth, despite taking a small hit from credit market turmoil.
'The market is undergoing a volatile period, but the impact of the credit volatility on our core business is minimal,' Chief Executive Wee Ee Cheong said in a statement. 'We will ride out this uncertain period and continue to focus on building our core business.'
UOB, which had a smaller direct exposure to risky debt compared to DBS, made provisions for its exposure to collateralised debt obligations (CDOs) in the second quarter and July.
It made another $20 million worth of provisions against its CDO investments of $388 million. In addition it made another $46 million of mark-to-market provision against its reserves.
UOB, controlled by its chairman Wee Cho Yaw and his family, is considered the leader in the loan market for small and medium businesses and has benefited from Singapore's strong economic growth.
Shares of UOB have risen faster than its rivals in the last quarter when Singapore banks were hit by concerns over exposure to CDOs. -- REUTERS
Related Link -
http://tinyurl.com/ywos6e
UOB's news release
http://tinyurl.com/2gav68
Financial results
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