United Overseas Bank Ltd. lowered its fee income growth forecast for 2023, signaling a more challenging outlook, even as it reported second-quarter profit that topped estimates.
Fee income will expand at a high single-digit percentage this year, and credit costs will be around 25 basis points, Chief Executive Officer Wee Ee Cheong said Thursday in a statement accompanying the earnings report. Last quarter, he projected a double-digit growth in fees, while expecting credit costs to be in a range of 20 to 25 basis points.
Net income, excluding one-off expenses, rose 35% to S$1.5 billion ($1.13 billion) from a year earlier in the three months ended June 30, according to Southeast Asia’s third-largest lender. That compares with the S$1.4 billion average estimate of six analysts surveyed by Bloomberg.
The Singapore-based lender is the first of the country’s three biggest banks to report profit that continues to be buoyed by lending income. That followed some of the biggest US banks including JPMorgan Chase & Co., which beat expectations this earnings season thanks to rising interest rates. The Federal Reserve has resumed raising rates, with the possibility of further hikes.
“While the global outlook remains uncertain, we expect the Asean region to stay relatively resilient,” Wee said, referring to the Southeast Asian region. “Growth will be supported by a more moderate interest rate environment in this region and a pick-up in tourism and demand for services.”
Credit Costs
Wee echoed concerns raised by global peers including Citigroup Inc.’s CEO Jane Fraser, who described the current environment as “challenging” amid a surge in write-offs tied to consumer loans.
At UOB, provisions for credit and other losses more than doubled to S$365 million. Total credit costs on loans jumped to 30 basis points, as the bank said more “pre-emptive” allowances were made.
UOB’s net interest income rose 31%, led by an expansion in net interest margin. Its loan-related fees and wealth management fees were softer compared to a year ago, as investor sentiment remained subdued, though these declines were partly offset by an increase in card fees, the lender said.
DBS Group Holdings Ltd., Singapore’s largest bank, will report results Aug. 3, followed by Oversea-Chinese Banking Corp. the next day. DBS had lowered its fee-growth forecast in the previous quarter.
(Updates with details throughout)
