UOB Quarterly Profit Falls 21%, Upbeat on Outlook

United Overseas Bank, the smallest of Singapore's three banking groups, reported a 21 percent fall in quarterly profit due to lack of one-off gains and as it booked losses on its European debt exposure.

No Title_42926603
Roslan Rahman | AFP | Getty Images

The bank however remains confident on its prospects.

"Asia continues to show resilience in the face of ongoing uncertainty from the West. And we remain optimistic this resilience will continue," UOB CEO Wee Ee Cheong said in a statement on Thursday.

"Our core business remains strong and we are well-positioned to capture new opportunities across Asia," he said.

UOB , which also has operations in Malaysia, Indonesia and Thailand, reported net profit of S$558 million ($443 million) in the three months ended December, down from S$706 million a year ago. The results lagged the S$575 million average estimate of six analysts polled by Reuters.

Excluding a one-time gain of S$152 million from the sale of assets in the fourth quarter of 2010, the Singapore bank's net profit edged up 0.8 percent from a year ago.

Singapore banks have been reporting strong loans growth since the start of last year as some European banks reduced their exposure to Asia to meet tougher capital requirements at home.

This month, DBS , Singapore's and Southeast Asia's biggest lender by assets, reported a better-than-expected 8 percent rise in quarterly earnings, while Oversea-Chinese Banking Corp , the city-state's number two, said fourth quarter net profit rose 18 percent.

UOB's shares have jumped about 20 percent so far this year, with financials leading a rally in the broader market.

UOB's net interest income grew 13 percent to S$978 million as customer loans rose 26 percent and net interest margin widened to 1.95 percent from 1.89 percent in the third quarter.

Fee and commission income rose 5.4 percent to S$327 million.

UOB further reduced its exposure to Europe and held S$1.58 billion in European investment securities at the end of December, down from S$2.63 billion at end-June, as it slashed its exposure to French banks.

The bank grew its dollar deposits by 18 percent in the fourth quarter from July-September to bring its loan-to-deposit ratio for the greenback below the 100 percent level.

Wee expects the bank's loans growth to be in the low teens this year. He also said margins on U.S. dollar-denominated loans were good given the lack of liquidity in the region.

UOB is also looking for opportunities in Myanmar and said it already had a representative office and existing relationships in the country.