UOB - DBS Research 2022-08-01: NIM Tailwind To Sustain; Management Pulled Back On Full Year Guidance

• UOB (SGX:U11)'s 2Q22 net profit of S$1.1bn improved 11% y-o-y/23% q-o-q, in line with consensus. Net interest income of S$1.9bn rose 18% y-o-y/11% q-o-q, driven by NIM that increased 9bps q-o-q to 1.67% ahead of management’s guidance of 1.60-1.62% for 2Q22.
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Largely flat fees amid macroeconomic uncertainties.

• UOB's net fee and commission income remained flat y-o-y/increased 25% q-o-q, due to record loan, trade-related, and credit card fees offset by lower wealth fees due to weaker market sentiment.
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New NPA formation spiked in the quarter; higher NPL ratio of 1.7%.

• UOB's non-performing loans (NPL) increased to 1.7% from higher new NPA formation at S$661m (1Q22: S$462m, average of S$461m for last three quarters), due to a China developer’s corporate account, for which UOB had commenced legal proceedings on.
• According to UOB, the remaining exposures are diversified and have strong LTVs based on UOB’s internal credit rating system. As a result of special allowances on this China developer, total loan allowances for 2Q22 was higher at S$173m, 22bps (1Q22: S$146m, 19bps), including general allowances (stage 1+2) of S$7m, 1bps (1Q22: -S$2m, 0bps) and special allowances (stage3) of S$166m, 21bps (1Q22: S$148m, 19bps).

Takeaways from analyst briefing by UOB

Overview on the backdrop.

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Rui Wen LIM DBS Group Research | Tabitha FOO DBS Research | https://www.dbs.com/insightsdirect/ 2022-08-01 SGinvestors.io

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