United Overseas Bank Ltd. (SGX:U11, Financial) posted better-than-expected profits in its latest earnings report last week. Oil and gas services led to the company declaring 799 million Singapore dollars ($585.5 million) in nonperforming assets through September.
Higher interest income and fees led to the company's profits rising 12% to SG$883 million. Analysts pegged the company's income at SG$841 million. Net income rose 15% to SG$1.41 billion.
The lender was able to raise loan prices due to interbank rates.
Active balance sheet management was a key factor in the company increasing its quarterly net interest margin by 10 basis points. Net interest margins rose to 1.79%. Rising interest rates also contributed to the company's growth.
The company's nonperforming assets were noted as being primarily from one "large account." The account, in the oil and gas sector, was not named directly by Chief Financial Officer Lee Wai Fai. Fai said the company's exposure to the oil and gas sector remains under stress and noted it has "adequate levels of allowance" to offset the industry's issues.
Credit card and wealth management fees helped boost the bank's bottom line.
Subdued growth over the past two years led to a recovery in the banking sector. Regional and local economies are expected to fuel approximately 3% growth this year. The growth rate is the strongest in three years.
"The asset quality of our overall portfolio was stable, apart from a couple of oil and gas-related issues, and our reserves buffer and capitalization remained high," Deputy Chairman and CEO Wee Ee Cheong said in a statement.
Nonperforming loan ratios are 1.6%, up from 1.5% in the previous quarter.
Non-interest income rose 2% from the prior year, hitting SG$830 million for the quarter. Commission and fee income rose to SG$551 million. Other non-interest income fell 12% to SG$279 million. The falling income includes income derived from trading, too.
The bank's net profits over the first three quarters of the year were S$2.54 billion, up 8%.
The company's earnings release also indicated the bank is confident about its long-term prospects in Asia. The bank is committed to supporting its customers through continued investments. United Overseas' shares are up over 20% in 2017, but still remain below the industry norm for the three major banks in Singapore.
The company's stock is up 23% in the trailing 12-month period.
Disclosure:The author does not have any stake in the listed equities
