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.
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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Above is an excerpt from a report by DBS Group Research. Clients of DBS may access the full PDF report @ https://www.dbs.com/insightsdirect/.
