UNITED Overseas Bank Ltd. reported a rise in its second-quarter profit, with the lender optimistic that Southeast Asia’s prospects can overcome concerns of aggressive rate hikes derailing global growth.
Net income rose 11% from a year earlier in the three months ended June 30, Southeast Asia’s third-largest lender said Friday. That’s largely in line with the S$1.1 billion average estimate of four analysts surveyed by Bloomberg News. Its shares rose as much as 0.9% on low volumes in early trading.
UOB’s positive outlooks underscores how the bank is getting a tailwind from higher interest rates, even as moves to curb inflation fan concerns they risk triggering an economic slowdown. The Federal Reserve raised rates by another 75 basis points this week. In Singapore, its central bank again tightened policy in a surprise move, on the back of its economy flatlining in the second quarter.
“We continue to see economic activity picking up as borders reopen and investment flows resume,” Chief Executive Officer Wee Ee Cheong said in a statement. He cited strong employment and buoyant consumer sentiment in Singapore, where institutional and private wealth inflows remain steady amid the country’s “safe haven” status.
Wee added that rising interest rates are expected to further boost its margins, with the lender expecting mid single-digit loan growth for this year.
“While the aggressive rate increases around the world are going to put a damper on global growth, we remain fairly optimistic of the resilience of our key markets in Southeast Asia,” Wee said.
The bank, which agreed to buy Citigroup Inc.’s consumer businesses in Southeast Asia, said it expects to get regulatory approval for the deal in Thailand and Malaysia by year end. In Vietnam, it’s expected to receive approval by the first quarter of next year, and for Indonesia, by the fourth quarter of 2023.
Larger rivals DBS Group Holdings Ltd. and Oversea-Chinese Banking Corp. are due to report next week.
Other key details:
- Net interest income climbed 18% in second quarter to S$1.9 billion from a year ago
- Allowance for credit and other losses fell 25% to S$137 million in second quarter year-on-year
- Singapore loans grew 7% from a year ago; Greater China loans grew 9% year-on-year
- About S$3b in loans to Chinese developers, making up 1% of group loans
- Credit card fees at new high as customer spending increased with borders reopening; wealth fees dipped on more subdued market sentiments – Bloomberg