8 Key Takeaways from UOB’s First-Quarter Results

United Overseas Bank (SGX: U11) is one of Singapore’s three largest banks. The group provides a wide range of banking services to individuals and corporations.

UOB announced its first-quarter 2020 results on 6 May. Let’s see how it performed in these eight key takeaways for investors.

  1. Total income for the group came in at S$2.41 billion (US$1.7 billion), flat year-on-year.
  2. Net interest income came in flat year-on-year compared to the same quarter in the prior year at S$1.59 billion.
  3. Total non-interest income came in at S$813 million – down from $S819 million a year ago. Fee income for the quarter came in 8% higher at S$515 million compared to the first quarter of 2019.
  4. The net interest margin stood at 1.71% down from 1.79% a year ago.
  5. Net profits were down 19% to S$855 million year-on-year. The decrease in net profits was on the back of higher impairment charges recognised by UOB due to the uncertain environment. This came in at S$286 million, up from S$93 million a year earlier.
  6. Non-performing loans came in at 1.6% inching up slightly from 1.5% year on year.
  7. Loan-to-deposit ratio improved to 85.4% compared to 86.6% for the first quarter of 2019. This indicates the bank is being cautious about administering new loans in this uncertain environment.
  8. UOB CEO Mr. Wee Ee Cheong commented that:

“In times such as these, we ensure our balance sheet remains strong and our capital and liquidity positions robust, so we can continue to support our customers through the roughest of cycles and crises, just as we have done so over the past eight decades. Coupled with our strengthened allowance coverage and through our collective efforts with all our stakeholders, we are confident that we will ride through these extraordinarily difficult times and emerge stronger.”

Foolish summary

Overall, UOB has announced a lower net profit figure on the back of higher impairment allowances. However, this is the prudent approach as it reduces unwanted surprises in the future for shareholders.

In terms of liquidity, UOB saw a decreasing loan-to-deposit ratio which is a positive sign. It shows that the bank is being more cautious with its lending activities.

Lastly, management is carefully managing its financial position as stated by Mr Wee. This should give shareholders confidence that they want to come out on top when this crisis ends.