United Overseas Bank (UOBH.SI), Singapore’s third-biggest lender, posted an almost 38% jump in quarterly profit, firmly beating expectations as bad debts slumped while fees from loans and investments rose. 

UOB largely benefited from a 43% drop in bad debt charges from a year ago, which was a recurring theme for most Asian lenders in the last quarter as the region’s economies rebound from the economic downturn.

 

“This latest set of results is consistent with improving stability in Asian economies, as reflected in our robust fee income and strong regional loan growth,” said CEO Wee Ee Cheong in a statement. 

 

“Going forward, the global dilemma remains — gradual but volatile recovery in the West and asset price inflation in the East.”

 

UOB posted a net profit of $688 million (in July-September, compared to $500 million a year earlier.

 

That compared with an average forecast of $582 million, according to seven analysts polled by Reuters.

 

UOB kicked off earnings for Singapore banks with Oversea-Chinese Banking Corp (OCBC) (OCBC.SI) reporting results on Monday and DBS (DBSM.SI) on Nov 4.

 

Asia’s economic recovery has helped reduced bad debts and boosted loan growth, but interest rate margins are under pressure in Singapore due to low rates in the United States, where the Federal Reserve may further ease monetary policy.

 

UOB, which is a market leader in Singapore in the private residential home loan market, lost its status as Singapore’s second-biggest bank by assets to OCBC, which bought ING’s private bank in Asia in a US$1.4 billion ($1.81 billion) deal earlier this year.

 

UOB’s net interest income dropped 4.5% to $883 million, as margins dropped 32 basis points from a year earlier even though loans grew almost 9%.

 

Fee and commission income rose 7.4% for UOB.

 

Singapore bank shares are in the red for the year as investors are concerned about weak margins as well as an economic slowdown in the next few quarters after a solid first half.

 

UOB shares have fallen 6% so far this year, less than rival DBS’s (DBSM.SI) 9.6% drop but more than OCBC’s (OCBC.SI) almost 2% decline.

 

UOB shares were down 1.4% at the midday break.

 

The overall Singapore index <.FTSTI> has climbed about 8% since the start of the year.