The lender has set aside more allowances for further macroeconomic deterioration.
United Overseas Bank’s (UOB) net profits crashed 30% YoY to $1.56b in H1 from $2.22b a year earlier, the bank’s latest results showed. Total income also shrank 6% YoY to $4.67b in H1.
The lender set aside more allowances for non-impaired assets as it braces for further deterioration in the macroeconomic outlook given the ongoing pandemic.
Net interest income (NII) contracted 6% YoY to $3.05b, driven by declining margins and interest rate cuts across regional markets as regulators attempted to cushion headwinds and to protect their economies’ production capabilities.
Net fee and commission income also came 4% lower at $960m on the back of reduced consumer spending on credit cards and slower loan disbursement fees from the economic contraction. This was partially offset by higher wealth management and fund management fees, largely in Q1, according to UOB.
On a segment basis, retail income was marginally lower at $2.06b due to impact from margin compression offset by volume growth and higher wealth fees. Meanwhile, assets under management (AUM) expanded by 9% to $129b, with overseas customers accounting for 60%.
Wholesale banking’s income came at $2.05b, with cross-border income easing marginally in line with slower business activity across the region.
For Q2, net earnings stood at $703m, 40% YoY lower than in Q2 2019 and 18% lower compared to Q1. Total income also fell 12% YoY to $1.22b.
The circuit breaker measures took place in the past quarter from April to June, which disrupted economic and business operations.
The board declared an interim dividend of 39 cents per ordinary share with an option for scrip dividend. This is in line with the Monetary Authority of Singapore’s call for banks to cap the total dividends per share (DPS) at 60% of the prior year’s DPS and to make available the option to receive dividends in scrip.
“Over the last few months, the COVID-19 pandemic has upended the way we live and work, with businesses and individuals having to deal with unprecedented challenges. With the global economy moving into the deepest recession in recent history, our financial performance for the first half of the year has not been immune to the impact,” said UOB deputy chairman and CEO Wee Ee Cheong.
He added that they will maintain prudence and continue to strengthen the bank’s risk management and provision coverage.
Photo courtesy of Wikimedia Commons.
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