Lower tax pushed UOB's 1Q profits up 9%

Loan growth was also impressive.

One of Singapore big 3 banks poppped the champagne on higher profits for the first quarter of the year thanks to lower effective tax.

UOB’s 1Q14 net profit grew 9% y-o-y, as lower effective tax offset conservative provisioning, which capped pretax profit growth at 1.5% y-o-y, said OSK-DMG.

Here's more from OSK-DMG:

1Q14 within expectations. 1Q14 net profit of SGD788m (+9% y-o-y; +2% q-o-q) was in line with our (SGD3.05bn) and street (SGD3.00bn) forecasts for the full year. Pre-impairment profit was flattish at SGD997m as net interest income (NII) growth of 15% y-o-y was offset by lower non-interest income (non-II) (-9% y-o-y) and higher operating expenses (+9%). As in 4Q13, a lower effective tax rate helped prop up earnings.

Results highlights. Positives in 1Q14 results were: i) stable net interest margin (NIM) of 1.73%; ii) healthy loan growth (+13% y-o-y); and iii) solid asset quality with no material rise in impaired loans from Dec 2013.

Where United Overseas Bank (UOB) differed from peers in 1Q14 was the absence of: i) NIM uplift from money market activities and repricing of trade loans; and ii) strong fee income from loan activities and customer treasury flows.

Management guidance. Generally, management kept its guidance for 2014. Loan growth to moderate to high-single digit (2013: +16.8% y-o-y) as lending business in Asean softens. NIM would likely be stable (2013: 1.72%) with margin pressure from outside regional operations off-setting a modest uptick in Singapore and China. Asset quality to remain resilient with no material rise in loan credit cost (2013: 25bps vs 1Q14: 32bps).

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