UOB

UOB: 3Q12 results in-line with expectations, partly boosted by one-off spike in associate dividends. Total income at $1.66b, +22.2% yoy and +3.3% qoq, while net profit at $707m, +35.5% yoy and flat qoq. Although Deutsche and CS highlights a drop in quality of income, with NPL’s jumping 18% qoq and a drop in NIMs. Net interest income for 3Q12 at $971m, -1.0% qoq as net interest margin declined 8bp to 1.84% as assets yields came under pressure with excess liquidity and tighter competition in the region. Total non-interest income at $693m, +10.2% qoq, as trading and investment income improved 14.2% to $173m. Fee and commission income continues to be strong at $372m, close to the record high of $386m. Loan-related fee income normalised to $90m in 3Q12 as 1H12 benefited from a few large corporate accounts. Income from investment related and fund mgt activities rose strongly from last qtr. Gross customer loans grew 1.7% to reach $152b as at 30 September 2012. Loans growth in 3Q12 was paced as the Grp continued to focus on risk-adjusted returns amid the uncertainty in the global economy. The increase was mainly in SG for housing and other consumer loans. Customer deposits grew $5.0b in 3Q12 to reach $174b, +3.0% qoq, almost double the rate of loans growth. The growth was recorded mostly in SG, and in fixed deposits as well as current accounts balances, as the Grp leveraged its strong credit ratings. Total operating expenses increased 8.9% while the expense-to-income ratio improved 5.1 ppt to 41.3% as income growth outpaced expenses. Total impairment charges increased $19m vs 3Q11, mainly due to higher individual impairment on loans. Grp remains well capitalized with core Tier 1, and total capital adequacy ratios at 12.6%, 14.3% and 18.3% respectively. CAR were higher, due to higher retained earnings and issuance of S$1.2b subordinated notes, partly offset by higher risk-weighted assets. Ratings as follow: Deutsche maintains Hold with $19.00 TP CS maintains Neutral with $20.00 TP Maybank KE maintains Sell with $18.30 TP