UOB - DBS Research 2023-02-24: 4Q22 Saw Higher One-Off Expenses; Top Line Growth To Continue

• UOB (SGX:U11)'s 4Q22 revenue of S$3.3bn improved 37%/5% y-o-y/q-o-q, in line with the consensus, while net profit of S$1.2bn was +13% y-o-y/-18% q-o-q, dragged by Citi’s integration costs (net of tax) of S$70m and stamp duty of S$176m, without which, net profit would be S$1,398m for 4Q22.
• - Read this at SGinvestors.io -
• Operating expenses increased by 29% y-o-y/4% q-o-q, which included the Citi integration costs.
• Cost-to-income ratio (CIR) was stable at 42.6%. CET1 ratio improved to 13.3% (3Q22: 12.8%). Loan book declined 1% q-o-q/+3% y-o-y.

Weaker non-interest income during the quarter.

• UOB's 4Q22 net fee income declined 7% q-o-q/16% y-o-y due to slower wealth management and loan-related fees, while card fees was at a record high. Other non-interest income declined 34% q-o-q/improved 62% y-o-y as 3Q22 was an exceptional trading quarter.

Higher specific allowances, higher new NPA formation.

• - Read this at SGinvestors.io -
• Total loan allowances of S$173m, 21bps (3Q22: S$135m, 17bps) includes a general allowances writeback of S$80m, -10bps (3Q22: S$8m, 1bps), and specific allowances of S$253m, 31bps (3Q22: S$127m, 16bps).
• There was higher new NPA formation at S$395m (3Q22: S$214m, average of S$502m for last four quarters) and these NPAs are well-secured corporate accounts; NPL was higher at 1.6% (3Q22: 1.5%) as Citi’s consolidation added S$165m to NPAs.

Takeaways from analyst briefing by UOB's management

NIM outlook.

• Read more at SGinvestors.io.

Rui Wen LIM DBS Group Research | https://www.dbs.com/insightsdirect/ 2023-02-24 SGinvestors.io

---