UOB Q2 profit down 40%; dividend per share at 39 cents with scrip scheme applied

SINGAPORE – UOB on Thursday (Aug 6) posted a 40 per cent drop in second-quarter net profit, hurt by weaker income and a surge in provisions.

The board declared an interim dividend of 39 cents per share, down from the year-ago quarter of 55 cents per share. The scrip dividend scheme will be applied. The move is in line with MAS’s guidance for local banks to moderate their dividends for 2020.

Net profit for the three months ended June 30, 2020 stood at $703 million, compared with $1.17 billion the same period a year ago. This is weaker than the consensus forecast of $814.5 million in net income estimated by four analysts in a Bloomberg poll.

Total income fell 12 per cent to $2.26 billion, with both net interest income and fee income down. Net interest margin for the quarter stood at 1.48 per cent, a sharp fall from the 1.81 per cent earned on loans a year ago, and the 1.71 per cent earned on loans a quarter ago.

The one-month Sibor as at Wednesday stood at an all-time record low of 0.25 per cent; the three-month Sibor of 0.438 per cent was at a level not seen since 2014.

Provisions against bad loans in the second quarter surged to $396 million, compared with just $51 million a year ago.

The non-performing loan ratio in the second quarter stood at 1.6 per cent, up from a year ago’s 1.5 per cent, and unchanged from a quarter ago.

Expenses for the second quarter fell 8 per cent from the year-ago period to $1.04 billion.

In a statement, Wee Ee Cheong, UOB’s deputy chairman and CEO said across the region, the group has supported more than one million individual and business customers with loan moratoria and other relief measures that amount to about 16 per cent of the bank’s total loans. The bank will be “steadfast” in seeing customers, colleagues and communities through these challenging times, he said.

“Over the last few months, the Covid-19 pandemic has upended the way we live and work, with businesses and individuals having to deal with unprecedented challenges. With the global economy moving into the deepest recession in recent history, our financial performance for the first half of the year has not been immune to the impact,” he said.

“However, UOB entered this crisis from a position of strength, having built our resilience through weathering past storms, be they economic, man-made or natural disasters. We maintain prudence and discipline in our risk management and will continue to strengthen our provision coverage.”

Shares of UOB closed on Wednesday at $19.42, up 11 cents.

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