UOB banking on higher loan yields

It considers US loans as its primary growth driver and will seek to build up its loan book over deposits.

Loans should keep expanding in the low-teens numbers, according to management, with the only major downside risk seen in its Indonesia market where a possible foreign ownership ruling could complicate matters with its wholly owned subsidiary.

Here's more from DBS:

Strong revenues. Non-interest income was a surprise, with gains from sale of investments (largely equities and government securities), due to improved market conditions. Otherwise results were within expectations. NIM improved across regional operations from higher loan yields, except in Malaysia (c.-20bps).

Robust loans growth; deposits growth was paced. Loans grew by 2.6% q-o-q (driven by consumer loans), vs a contraction in deposits. By currency, S$ and RM loans were on an uptrend while US$ loan traction was sedentary. Deposits only grew in countries where loans increased, i.e. in Singapore and Malaysia. US$ deposits grew by 9% q-o-q as a deliberate measure to build up US$ funding to fuel growth. Other countries (Indo, Thai, “others”) saw both loans and deposits contracting in 1Q12.

Provisions were lower, as expected. Overall provisions halved q-o-q but an uptick in individual impairments was seen in Singapore (shipping) and Malaysia (fraud case). Collective impairments were lower, in line with slower loans growth.

Focus on increasing NIM. UOB remains hopeful it can continue pricing up loan yields, particularly US$ loans. With the US$ loanto-deposit ratio lowered to 89% in 1Q12 (4Q11: 100%), UOB is comfortable in growing its US$ loan book in upcoming quarters.

Overall guidance unchanged. Management still guides for low-teens loans growth, 42-43% cost-to-income ratio, and 30- 50bps credit charge. There appears to be minimal risk to asset quality while capitalisation remains strong.

Awaiting regulatory decision in Indonesia. As UOB wholly owns UOB Indonesia, the subject of foreign ownership threshold could be an issue should there be changes in these regulations, especially if applied retrospectively. We understand that an announcement pertaining to this regulation could be made in June/July.

Reaching the people who run Asia's businesses is harder than it used to be.

Inboxes are crowded. Attention is short. The executives you most want to reach — the founders, CFOs, and operators who actually move budgets — are the hardest to find through the usual channels. If you're building a company, a category, or a reputation, you already know this.

We've spent twenty years building the room they read. Singapore Business Review is where senior decision makers in Singapore and across Southeast Asia come for business coverage they can't get elsewhere — in print, online, and in person at the summits and roundtables we host across seven markets.

If you have something these readers should know about — a point of view worth publishing, a product worth their attention, an event worth their time — we'd like to hear what you're trying to do.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia