United Overseas Bank (UOB) has reported a 43% y-o-y growth in earnings of $1.0 billion for the 2QFY2021 ended June, bringing its total net earnings for the 1HFY2021 to $2.0 billion, 29% higher than earnings of $1.56 billion for the corresponding period the year before.

The higher earnings were supported by stable net interest margin (NIM), record fees and lower credit allowance.

Earnings per share (EPS) for the 1HFY2021 stood at 2.35 cents on a fully diluted basis, from 1.86 cents in the 1HFY2020. For the half-year period, the bank has declared an interim dividend of 60 cents per share, translating to a dividend payout ratio of 50%, the same as that of 2019.

The higher dividend comes amid the recent lift in dividend cap by the Monetary Authority of Singapore (MAS). UOB CFO Lee Wai Fai also previously promised that the bank would resume its 50% payout ratio once the dividend cap was relaxed.

In addition, UOB has announced the suspension of its scrip dividend scheme. The dividend will be paid in cash on Aug 27. Post-dividend, the group says its balance sheet remains in a “solid” position.

In the 2QFY2021, net interest income (NII) grew 8% y-o-y to $1.58 billion due to robust loan growth of 6% and an eight basis point y-o-y increase in net interest margin (NIM) to 1.56%.

Net fee and commission income grew 34% due to strong growth in wealth management, loan-related and fund management fees.

Other non-interest income fell 32% y-o-y to $243 million mainly attributable to a drop in non-customer-related gains.

Trading and investment income fell 38.1% y-o-y and 26% q-o-q to $182 million due to the higher gains on investments seen in the 1QFY2021.

The bank’s cost-to-income ratio improved from 46.0% to 43.7% in the 2QFY2021. Non-performing loan (NPL) fell 0.1 percentage points y-o-y and remained stable q-o-q at 1.5% for the 2QFY2021, with total credit costs normalising to 24 basis points from 52 basis points.

The Edge Singapore