UOB’s core net profit for Q2 soared 35% to SGD 1.5 billion from the same period last year, while its net interest income rose 31%. According to Chief Financial Officer Lee Wai Fai, loans will be repriced, which will enable UOB to better manage its cost of funding thanks to the availability of Singapore depositors who have shown a preference for safe investments.
UOB is expecting better conditions for earnings from its net interest margin in the next quarter after the U.S. Federal Reserve increased its rate overnight. The Singapore-based lender saw its core net profit for the second quarter grow 35% to 1.5 billion Singapore dollars ($1.13 billion) from a year prior. This was due to a 31% rise in its net interest income, which was supported by strong margins increasing by 50 basis points to 2.13%, according to the statement released today.The bank's CFO Lee Wai Fai commented in an exclusive interview that there is a "some upside biasness" to their net interest margin following the Fed's announcement. With the accompanying rate hike, the benchmark borrowing cost has been taken to a target range of 5.25%-5.5%, a level not seen since 2001. Markets had already accounted for the move.
UOB's stock rose 0.7% on Thursday to reach a three-month peak. This was in line with the performance of the Straits Times Index in Singapore and was not far above the 1% increase of the MSCI Asia ex-Japan.
Lee commented that it is probable that loans will be remunerated, allowing the bank to better control their cost of funding due to the preference for safer investments among Singaporean depositors. As investor attitudes were lacklustre, UOB saw a reduction in loan-related and wealth management charges, which was principally balanced out by an elevation in card fees. Consequently, the company declined the double-digit income growth outlook provided at the beginning of the quarter to a high single digit growth.
UOB's projection for low to mid single-digit loan growth is still the same. Credit cost is anticipated to reach 25 basis points during the rest of the year, which is somewhat higher than their prior estimation of 20 to 25 basis points. According to Lee, he is confident that the second half of the year will be much better with the reopening of the economy and the resumption of trade-related activities. He adds that people have got accustomed to the high interest rate environment, so customers should return to the market. UOB is the first of the Big Three banks in Singapore to announce their quarterly earnings. The following two will be DBS on 3rd August and OCBC on 4th August.
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