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UOB fourth-quarter profit drops 5.7% on write-downs
Gabriel Chen Thu, Feb 28, 2008 The Straits Times
UNITED Overseas Bank (UOB) posted a 5.7 per cent fall in quarterly profit to $506 million, as the fallout from the United States' sub-prime crisis resulted in new charges in its accounts. '2008 looks set to be a challenging year,' UOB Group's deputy chairman and chief executive, Mr Wee Ee Cheong, said yesterday. UOB's results came in below market expectations, after the lender took a larger-than-expected impairment charge to partly account for the falling value of some loans, assets and other securities. The bank posted new impairment charges of $128 million in the fourth quarter ended Dec 31. That meant full-year charges rose 66 per cent to $300 million.

Speaking at the bank's full-year results briefing at UOB Plaza, Mr Wee said its 'strong balance sheet' and 'established regional platform' meant UOB is well-placed to seize opportunities for long-term growth.

Asked if UOB plans to respond to Maybank's recent mortgage rate cut, and about the possibility of a mortgage war, Mr Wee replied: 'I don't know yet. My people have not discussed it with me, but obviously we're monitoring the situation.'

'Do you want me to increase or do you want me to decrease?' Mr Wee asked, to much laughter from the floor.

Jokes aside, one of the pressing questions on analysts' minds was answered yesterday when UOB bared its books to reveal the extent of its exposure to the US sub-prime market.

The bank wrote down $45 million for the quarter for its collateralised debt obligations portfolio. This brought its cumulative allowances to $99 million.

For the full year, UOB's net profit plunged 17.9 per cent to $2.1 billion from $2.6 billion a year earlier.

The extent of the full-year profit slump was explained by a one-time gain of $689 million from a special dividend received from Overseas Union Enterprise (OUE) and divestment gains of OUE and Hotel Negara in the previous financial year.

Net interest income - what a bank earns from borrowers after paying interest to depositors - rose 5.9 per cent to $743 million in the fourth quarter. It was up 10 per cent at $2.98 billion for the full year.

Net interest margin for the quarter was flat at 1.94 per cent.

Some analysts feel the substantial fall in the Singapore inter-bank offered rate, or Sibor, could eat into UOB's margins further.

'Revenue resilience surprised on the upside, but we think most of it, such as net interest margins and market-related commissions, is unsustainable,' said ABN Amro Asia Securities senior analyst Trevor Kalcic.

UOB has recommended a final tax-exempt dividend of 45 cents a share. This brings the full-year dividend to 73.7 cents, or a yield of 3.9 per cent, the lowest among the three banks, CIMB-GK analyst Kenneth Ng pointed out.

gabrielc@sph.com.sg