UOB’s share price flat after it raised its interim dividend to 55 cents in Q2 results

UOB Group posted an 8% growth in net profit at S$1.17 billion for the second quarter, supported by improvements in interest and non-interest income. Shares of the bank traded flat following the results release on Friday morning, as the muted trading was partly due to the surprise new round of tariffs announced by United States (US) president Donald Trump on Chinese goods which rattled markets.

In its earnings release, UOB raised its interim dividend for the second time in two years to 55 Singapore cents per share, an increase from 50 Singapore cents a year ago and 35 Singapore cents in 2017. The raise in dividend was a commitment from the bank to “reward” its shareholders, it said, but it also has kept adequate resources for capital and growth needs.

The raised dividends helped cushion the bank’s stock from volatility faced by other stocks locally and globally on Friday due to escalating tensions from US-China’s trade war.

Earnings per share for the quarter was at S$2.75, up from S$2.51 a year ago.

UOB’s shares were down by 0.23% or S$0.06, at S$26.22 in early trading on Friday. Prior to the group’s earnings release this morning, shares of UOB had closed at S$26.28 on Thursday, 0.455% or S$0.12 lower.

Challenging macro environment but balance sheet remained healthy

Net interest income for the second quarter was up by 7% to S$1.65 billion from a year ago, as gross loans were up by 9%. Net interest margin fell by two basis points to 1.81% for the second quarter, from 1.83% in the same period a year ago.

Meanwhile, non-interest income surged by 33% to S$403 million, thanks to higher trading income and gains from investment securities.
Total expenses gained 11% to S$1.13 billion in line with operating income growth, while cost-to-income ratio was maintained at 43.7%.

The record set of results for the first half of 2019 was achieved ‘against the increasingly challenging macro environment’, commented UOB’s deputy chairman and chief executive Wee Ee Cheong.

‘Our balance sheet remained healthy with robust capital and liquidity positions, while asset quality stayed sound as we continue to grow our franchise selectively. Our recent perpetual capital securities issuance also saw overwhelming interest from investors, reflecting their confidence in the group’s strong financial standing,’ Wee said.