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UOB posts record high earnings of $4.34 bil in FY19 despite slowing q-o-q in fourth quarter

Stanislaus Jude Chan
Stanislaus Jude Chan • 3 min read
UOB posts record high earnings of $4.34 bil in FY19 despite slowing q-o-q in fourth quarter
UOB has recommended a final dividend of 55 cents per share and a special dividend of 20 cents per share, bringing total dividend for FY2019 to $1.30 per share.
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SINGAPORE (Feb 21): United Overseas Bank (UOB) saw a 10% y-o-y rise in net earnings to $1.01 billion in 4QFY2019 ended December, from $916 million in the corresponding quarter last year.

The growth was driven by net interest income as well as trading and investment income.

Net interest income increased 2% to $1.64 billion, led by loan growth of 3%.

Net fee and commission income also rose 2%, to $476 million, on the back of healthy momentum in wealth management and higher credit cards fees.

Trading and investment income nearly quadrupled to $224 million, led by improved gains from investment securities on market recovery and stronger customer flows.

While 4Q earnings were 10% q-o-q lower than earnings of $1.12 billion in 3QFY2019 – attributable to a seasonally slower fourth quarter – this brought full-year earnings up 8% y-o-y to a record high of $4.34 billion for FY2019.

Total income rose 10% to cross the $10 billion mark in FY2019, led by healthy growth in client franchise as well as an improvement in trading and investment income.

For the full year, net interest income grew 6% to $6.56 billion, as the average gross loans for the year was 9% higher.

However, this was moderated by a 4-basis point drop in net interest margin arising from lower interest rates and increased competition.

Net fee and commission income increased 3% to $2.03 billion, led by double-digit growth in wealth management and credit cards, moderated by lower fund management fees.

Other non-interest income rose 54% to $1.44 billion, with trading and investment income rising 72% to $1.12 billion from improved customer flows and higher gains from investment securities.

UOB Group noted that all business segments continued to deliver strong income growth.

Group Retail income grew 9% to $4.30 billion, driven by higher net interest income from volume growth and improvement in deposit margin, as well as strong contribution from the wealth management business.

Meanwhile, Group Wholesale Banking income grew 6% to $4.10 billion, benefitting from cash management, treasury and loan-related activities.

Total expenses increased 12% to $4.47 billion on the back of investments in talent and technology, bringing cost-to-income ratio for the year up to 44.6%.

Total allowances increased 11% to $435 million, mainly due to higher allowances on impaired assets.

Asset quality remained sound with total credit costs for the full year rising 2 basis points from a year ago to 18 basis points in FY2019.

For FY2019, the group’s return on equity increased to 11.6%.

The group maintained its strong capitalisation, a well-diversified funding base and solid balance sheet position. The loan-to-deposit ratio was stable at 85.4% and the Common Equity Tier 1 ratio was robust at 14.3%.

The non-performing loan ratio remained at 1.5% as at Dec 31, 2019. Total allowances for non-impaired assets stood at $1.98 billion with a coverage for non-performing assets at 87%, or 202% after taking collateral into account.

UOB has recommended a final dividend of 55 cents per share and a special dividend of 20 cents per share for FY2019, to be paid on May 21, 2020.

Together with the interim dividend of 55 cents per share paid earlier, this brings total dividend for FY2019 to $1.30 per share, some 8.3% higher than total dividend of $1.20 in FY2018.

“We started 2020 on a strong footing having achieved record earnings last year on the back of broad-based growth across our business segments,” says Wee Ee Cheong, UOB’s deputy chairman and chief executive officer.

“Many signs point to more challenging times ahead including the unfolding impact of the COVID-19 epidemic,” Wee adds. “We will continue to invest in our capabilities, including digital, and seize the opportunities arising from the shifting economic environment. It will enable us to emerge stronger from these trying times and to scale up our franchise across the region.”

As at 9.15am, shares in UOB are trading 9 cents lower, or down 0.4%, at $25.78, following the results announcement.

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