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UOB Q3 net profit drops 1% to $1.38 billion after one-off Citi acquisition costs

SINGAPORE - UOB on Thursday posted core net profit of $1.48 billion for the third quarter ended Sept 30, an increase of 5 per cent from the same period last year, in line with Bloomberg forecasts.

Core net profit excludes the one-off expenses from the bank’s acquisition of Citigroup’s Malaysia, Thailand and Vietnam consumer banking business.

Including those expenses, net profit for the quarter fell 1 per cent to $1.38 billion from $1.4 billion a year earlier. This tralied the mean estimate of $1.46 billion from four analysts polled by financial data provider LSEG (London Stock Exchange Group).

Singapore’s third-largest bank said its Q3 performance was driven by higher net fee income and net interest income.

Net fee income for the third quarter rose 14 per cent year on year to a near all-time high of $591 million, powered by higher credit card fees, wealth management fees and loan-related fees.

UOB said credit card fees almost doubled to a record high of $104 million as consumer confidence continued. 

Meanwhile, net interest income, which is the difference between what the bank earns from its lending activities and the interest it pays for deposits, rose 9 per cent year on year to $2.4 billion, led by a 14 basis points uplift in net interest margin to 2.09 per cent.

Other non-interest income rose 1 per cent year on year to $436 million, led by an increase in  customer-related treasury income. The performance was diluted by lower valuation on investments due to volatility in the markets.

On a quarter-on-quarter basis, core net profit fell 2 per cent to $1.5 billion. Including the one-off integration expenses, net profit stood at $1.4 billion.

The non-performing loan (NPL) ratio remained stable at 1.6 per cent and balance sheet remained robust with healthy liquidity and common equity tier 2 ratio at 13 per cent.

For the first nine months of the year, core net profit surged 33 per cent to $4.6 billion from a year ago, UOB said.

Including the one-off expenses from the integration of Citigroup’s consumer businesses acquired last year, net profit was at $4.3 billion, a jump of 26 per cent year on year.

UOB expects better loan and fees growth next year despite the challenging macroeconomic outlook.

In a slide presentation, UOB deputy chairman and chief executive Wee Ee Cheong projected mid single-digit loan growth and double-digit fee growth for 2024, versus low-to-mid single-digit loan growth and high single-digit fees growth for 2023.

He also projected margins to remain at current levels next year, but expects credit cost at around 25 to 30 basis points compared to around 25 basis points for the rest of 2023.

Said Mr Wee: “The macroeconomic environment could remain bumpy. However, we expect the Asean region to stay resilient. Consumer sentiments remain strong and rising investment flows into the region will bolster growth.”

UOB’s results kick off the third-quarter earnings season for local lenders. DBS Bank will report its numbers on Nov 6, and OCBC Bank on Nov 10.