Singapore's UOB Misses Forecasts on Costs, Bad Debts

Singapore's United Overseas Bank on Tuesday posted an lower-than-expected 18% rise in quarterly profit as higher costs and provisions for bad loans ate into rising interest earnings and
fee income.

Singapore banks are seeing higher loan growth this year because of a property boom and a recovery construction sector. Loans in the first quarter grew 10.3%, the highest pace in nine

UOB, Singapore's second-biggest bank, said lending grew 17.2% in the first quarter, slower than DBS's 20% expansion.

The bank reported net profit of S$518 million (US$342 million) for the Jan-March period, up from S$439 million in the same period a year ago and against an average forecast of S$529 million by two analysts polled by Reuters.

"I am not very excited about this result because the growth wasn't exceptional," said David Lum, a banking analyst at Daiwa Institute of Research. He said the bank saw larger provisions in its regional operation specially in Thailand which slowed the profit growth.

UOB recorded a 59% rise in impairment charges for bad loans to S$87 million.

But Lum said UOB's higher expenses were in line with a trend of higher staff costs seen across the industry.

Operating expenses rose 19.1% to S$472 million in in the first quarter due to higher spending on staff, promotions and information technology.

Last week DBS Group Holdings, Singapore's biggest lender, reported a 19% rise in quarterly net profit, beating market expectations, due to higher interest earnings and fee income.

Singapore's smallest bank, Oversea-Chinese Banking Corporation, will report earnings on Wednesday.

UOB, controlled by its chairman Wee Cho Yaw and his family, had total assets of S$161 billion at the end of 2006. The bank's stock market value is about US$23 billion.

Wee is Singapore's second-richest man with a fortune of $4.7 billion, according to Forbes Magazine, ranking after Ng Teng Fong, the founder of property developer Far East Organisation. Last month his son Wee Ee Cheong succeeded him as chief executive officer.

Net interest income rose 16.6% to S$762 million in the first quarter from a year earlier while non-interest income, which includes fees and commissions, grew 23.4% to S$432 million.

UOB has subsidiaries in Malaysia, Indonesia, the Philippines and Thailand. In January, it agreed to buy a 10% stake in Vietnam's Southern Commercial Joint Stock Bank.

It is also trying to buy a strategic stake in China's Evergrowing Bank which is based in the eastern coastal city of Yantai.

UOB shares are up 17.5% in 2007, compared to 3% for DBS and 23% for OCBC.