United Overseas Bank Profit Beats Estimates on Loan Growth

United Overseas Bank Ltd., Southeast Asia’s third-largest lender, posted its highest quarterly profit in eight years on higher loan growth and gains from investments.

Net income rose 3.2 percent to S$808 million ($648 million) for the three months ended June 30 from S$783 million a year earlier, the company said in a statement to the Singapore stock exchange today. That beat the S$764 million average of six analysts’ estimates compiled by Bloomberg.

The company and its bigger Singaporean rivals have sought to expand outside the city-state to offset Southeast Asia’s lowest lending margins. UOB, which has units that provide banking services to companies expanding in China, India and Southeast Asia, is the most geographically diversified Singapore bank, Credit Suisse Group AG said in a July 15 report.

“There seems to be pretty good momentum in loan growth, and it’s come in higher than the company’s guidance of high single-digit growth,” Julian Chua, a Kuala Lumpur-based analyst at Nomura Holdings Inc., said by phone today. “Margins are also stable, and that’s a good thing for Singapore banks.”

The profit was reported after Singapore’s stock market closed. Shares of UOB rose 0.5 percent to S$24.16 today, taking gains this year to 14 percent. The benchmark Straits Times Index advanced 0.6 percent.

Loan Growth

UOB’s second-quarter net interest income, the difference between what it earns on loans and pays on deposits, climbed 11 percent to S$1.12 billion from a year earlier.

Loans expanded 12 percent in the period to S$189.7 billion. The growth was “broad based across territories and industries,” UOB said in the statement. Its net interest margin, a measure of lending profitability, was unchanged from a year earlier at 1.71 percent.

Banks in Singapore had an average net interest margin of 1.75 percent, the lowest in Southeast Asia, according to latest filings compiled by Bloomberg. Indonesia had the highest average of 5.63 percent, the data show.

Provisions it set aside for sour debt doubled from a year earlier to S$150 million amid “non-performing accounts in Thailand and Singapore,” the bank said. Its non-performing loans ratio was unchanged from a year earlier at 1.2 percent.

Fees and commissions declined 6 percent from a year earlier to S$410 million. Other non-interest income surged 83 percent to S$350 million as UOB made gains on its investments.

DBS Group Holdings Ltd., UOB’s largest Singaporean competitor, may report a 5.7 percent gain in second-quarter profit tomorrow, according to the average analyst estimate in a Bloomberg survey. Oversea-Chinese Banking Corp., the country’s second-biggest lender, is due to report on Aug. 5.

The net income reported by UOB today is the most since the S$1.1 billion the bank posted for the second quarter of 2006, which included one-time gains from a special dividend and from selling investments.

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