UOB

UOB: 4Q14 results were ahead of estimates, with net profit at $786m (+1.7% y/y, -9.3% q/q) versus Bloomberg consensus estimates of $743m, aided by loans growth which helped shore up interest income. The results brought FY14 net profit to $3.2b (+8%).

Net interest income came in at $1.2b (+6.7% y/y, +1.1% q/q), driven by total loans growth (+9%) from Singapore (+6.6%), Thailand (+20.9%), Indonesia (+12.9%), Greater China (+11.2%), Malaysia (+3.3%) and others (+36.9%). Net interest margin (NIM) however fell to 1.69% (-4bps y/y, -2bps q/q), weighed by lower NIM from Singapore and Malaysia.

Customer deposits rose 9.0% to $233.8b, setting the loan-to-deposit ratio at 83.8% (4Q13: 83.4%, 3Q13: 85.8%).

Non-interest income was at $682m (+5.4% y/y, -16.4%), with the q/q decline largely due to seasonality trends. On a y/y basis, income was driven by contributions from credit card (+5.8%), loan-related activities (+4.1%) and service charges (+7.8%), partly offset by a 26% decline in trading gains to $119m, due to less favourable trading conditions.

Overall operating expenses rose 5.6% to $805m, in tandem with the rise in revenue and higher IT-related costs.

Bottom-line was weighed by a 19.9% rise in impairment charges to $166.0m, due mainly to a few isolated non-performing accounts in Thailand and Indonesia

Asset quality remained healthy, with NPL ratio at 1.2% (4Q13: 1.1%, 3Q14: 1.2%), while loan-loss coverage was at 146%.

ROE declined to 11.3% (4Q13: 12.8%, 3Q14: 12.9%) and capital adequacy ratios remained stable with fully-loaded CET1 CAR of 13.9% and Tier-1 CAR at 13.9%.

Going forward, management remains confident of the long-term prospects of the region and its ability to seize the right opportunities to achieve sustainable growth, adding that the establishment of the ASEAN Economic Community this year will result in greater integration of its core markets, and enable it to provide seamless connectivity and consistent quality service to its customers.

DPS of 55¢ declared, taking FY14 total payout to 75¢ (unchanged).

UOB trades at 1.38x P/B versus DBS’s 1.26x and OCBC’s 1.41x.