The United Overseas Bank Ltd. (UOB) logo is shown on the company's building in Singapore's central business district. Bloomberg
United Overseas Bank Ltd. (UOB) reported a slight drop in its second-quarter profit due to a decrease in lending income. However, strong gains from fees, particularly in wealth management, helped soften the impact. For the quarter ending June 30, 2024, UOB's net income, excluding one-time costs, fell by 1% to S$1.49 billion (about $1.11 billion). This result was slightly above the S$1.47 billion average forecast by analysts surveyed by Bloomberg.
Chief Executive Officer Wee Ee Cheong expressed confidence in the bank’s ability to handle current economic uncertainties. He noted that while global growth faces challenges from geopolitical tensions and high interest rates, Southeast Asia remains relatively strong. UOB is maintaining its 2024 outlook, projecting modest single-digit loan growth and double-digit growth in fees.
UOB, which is controlled by the billionaire Wee family, has been a pioneer among Singapore’s major banks in expanding its wealth management business. As Singapore has become a key global center for asset management, this segment has become an important revenue source, especially when traditional lending growth slows down.
The bank's results were in line with expectations, according to analysts from Morgan Stanley. They highlighted UOB as their preferred bank in Singapore.
A notable highlight from the earnings report was a significant increase in net fee income, which rose by 18% to nearly a record level. This boost was driven by higher fees from loans and wealth management services. Credit card fees also saw double-digit growth.
On the other hand, net interest income declined by 1% to S$2.4 billion. This was due to a decrease in the net interest margin, a measure of lending profitability, which fell by seven basis points compared to the previous year.
UOB also noted a reduction in one-off expenses related to its acquisition of Citigroup Inc.’s retail operations in four regional markets. Integration costs for operations in Malaysia, Indonesia, and Thailand have dropped significantly, while integration in Vietnam is scheduled for 2025. This quarter, integration costs amounted to S$64 million, a 30% decrease from the previous year.
Looking ahead, Oversea-Chinese Banking Corp. will report its earnings on Friday, followed by DBS Group Holdings Ltd., the largest bank in Southeast Asia, next week.
UOB’s profit slightly decreased due to lower lending income, but strong fee income, especially from wealth management, helped offset the decline. The bank remains optimistic about its future growth, maintaining its 2024 projections.
