UOB - DBS Research 2022-10-28: A Stellar NIM Showing, 3Q22 Results Strongly Ahead Of Consensus

• UOB (SGX:U11)'s 3Q22 revenue of S$3.2bn grew 30% y-o-y/18% q-o-q while net profit of S$1.4bn improved 34% y-o-y/26% q-o-q, a strong beat of the consensus and our expectations.
  • Net interest income of S$2.2bn rose 39% y-o-y/20% q-o-q, driven by NIM that increased 28bps q-o-q to 1.95%, a record quarterly growth. This is also ahead of management’s guidance of > 20bps improvement by year end from 2Q22 NIM of 1.67%.
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  • Cost-to-income ratio improved to 42.6% (2Q22: 43.8%) on robust income growth.
  • Capital ratio stood strong with a healthy CET1 ratio of 12.8% (2Q22: 13.1%).
  • Net fee and commission income declined 10% y-o-y/8% q-o-q, due to a moderation in loan/trade-related fees after an impressive 2Q22 and muted wealth fees amid the soft market sentiment. However, the lower fee income q-o-q was offset by record-high customer-related treasury income driven by hedging demands and investment opportunities, and strong trading and liquidity management activities boosting other trading and investment income (+80% y-o-y/+73% q-o-q).
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  • Total loan allowances for 3Q22 were lower at S$135m, 17bps (2Q22: S$173m, 22bps); including general allowances (stage 1+2) of S$8m, 1bps (2Q22: S$7m, 1bps); and special allowances (stage3) of S$127m, 16bps (2Q22: S$166m, 21bps). New NPA formation was lower at S$214m (2Q22: S$661m, average of S$407m for last four quarters). NPL ratio fell to 1.5% (2Q22: 1.7%), on the back of the reversal of Shimao’s NPL exposure.

Takeaways from analyst briefing by UOB's management

NIM outlook.

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Rui Wen LIM DBS Group Research | Tabitha FOO DBS Research | https://www.dbs.com/insightsdirect/ 2022-10-28 SGinvestors.io

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