SINGAPORE (Oct 26): UOB Group reported 3Q18 earnings of $1.04 billion, 17% higher than the same quarter last year, driven by double-digit growth in net interest income and lower allowances.

Net interest income rose 14% to $1.60 billion, from healthy loan growth and a net interest margin uplift of two basis points to 1.81%.

Net fee and commission income increased 2% to $484 million due to higher loan-related, credit card and trade-related fees. Other non-interest income was lower at $244 million as 3Q17 recorded stronger gains from investment securities.

Total expenses for the quarter increased 12% from a year ago to $1.01 billion, mainly from higher staff costs and IT-related expenses. The cost-to-income ratio for the quarter was 43.4%.

Total allowances more than halved to $95 million, largely due to high allowances provided for impaired loans from the oil and gas and shipping sectors in 3Q17.

As at Sept 30, the group’s funding position remained strong with stable loan-to-deposit ratio at 85.7% as customer deposits and gross loans both grew 2% from last quarter to $294 billion and $255 billion respectively.

The non-performing loan ratio improved to 1.6% from 1.7% in the last quarter. The coverage for non-performing assets remained stable at 90%, or 189% after taking collateral into account. Total allowances for non-impaired assets remained adequate at $1.99 billion as at Sept 30.

As at Sept 30, the group’s Common Equity Tier 1 CAR remained strong at 14.1%. The group’s leverage ratio of 7.4% was more than double the regulatory minimum requirement of 3%.

Wee Ee Cheong, UOB’s deputy chairman and CEO, says, “Amid headwinds posed by escalating trade tensions and cautious business sentiment, we sustained stable performance in the third quarter. Our overall balance sheet remained healthy with robust capital and liquidity positions. Our disciplined management of capital and diversified funding base enable us to navigate near-term uncertainties.”

In a results review, RHB Research says UOB’s 3Q18 results announced this morning were in line with expectations and is maintaining its "buy" call but with target price under review pending analyst teleconference later today.

As at 10.28am, shares in UOB are down 2.5% at $24.32.