Why UOB's stellar 1Q performance may unfortunately be a one-off event

Earnings projection down to S$2885m.

According to OCBC Investment Research, the outlook for NIM is still mixed and likely to hover at current level. Overall, we expect its FY13 performance to be supported by higher fee income, with growth rate for Non Interest Income doubling that of Net Interest Income. OCBC does not expect a repeat of the strong 1Q13 Fee Income for the remaining three quarters of the year.

OCBC noted that taking these into consideration, it made very slight adjustments to its FY13 earnings projection, dropping it from S$2900m to S$2885m.

Here's more:

In line with the other two banks, UOB Group posted 1Q13 net earnings which also exceeded street expectations. 1Q net earnings of S$722m were up 5% YoY and 4% QoQ and ahead of consensus of S$688m based on Bloomberg poll.

While Net Interest Income fell 4% YoY and flat QoQ to S$964m, its overall performance was buoyed by higher Non-Interest Income, which rose 12% YoY and 13% QoQ to S$708m. Together with lower operating expenses, this gave its operating profit a boost to S$976m. Net Interest Margin (NIM) fell from 1.98% in 1Q12 and 1.76% in 4Q12 to 1.70% in 1Q13.

Loans grew a healthy 7.4% from last quarter to S$167b. Impairment charge fell QoQ from S$150m to S$130m.

The key highlight was the strong 17% QoQ or 25% YoY increase in Fee and Commission Income to S$453m in 1Q13. On a QoQ basis, several units enjoyed strong double-digit growth. This included loans (+63%), fund management (+19%) and Investment (+18%).

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