At a glance, United Overseas Bank’s (UOB) results, announced on May 6 were not as spectacular as that of DBS Group Holdings, announced a week earlier. UOB’s net profit rose 46% q-o-q and 18% y-o-y to $1 billion. This compares with DBS’s 72% y-o-y and 99% q-o-q surge to $2 billion. Interestingly, though, UOB’s profit before allowances rose 16% q-o-q and 6% y-o-y, while DBS’s profit before allowances rose 35% q-o-q but fell 8% y-o-y.

“UOB’s strong financial results for 1Q2021 highlight the rising profitability trend for Singaporean banks. We expect that Singapore banks’ profitability will continue to recover in 2021 amid receding asset risks and improving operating conditions,” says Eugene Tarzimanov, vice president, senior credit officer, at Moody’s Investors Service.

Unlike DBS, UOB had a more cautious message for investors. During an analysts’ call, Lee Wai Fai, group CFO at UOB, gamely answered the same question asked in a number of different ways: What would it take for UOB to write back some of its cumulative general provisions which now stand at $3.03 billion as at March 31? Of this, more than $1 billion is in management overlay, the amount over and above what a bank’s macroeconomic variable (MEV) model requires a bank to have in general provisions.

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