Summary of UOB’s 2Q24 results
UOB reported its results and dividends for the second quarter of 2024 (2Q24).
- UOB 2Q24 net profit was marginally higher by 0.8% year-on-year, but down 4.0% from 1Q24’s level.
- Total income fell 1% in 2Q24 from 1Q24, dragged down by the volatile trading income. This offset gains in fee income growth (+7%) and net interest income (+2%).
- Interim dividend has been raised to 88 cents a share (1H23: 85 cents). The payout ratio in 1H24 was higher at 51%.
What’s positive about this set of results are an expansion in net interest margin, pickup in customers’ loans demand, and stronger fee income.
Net interest margin increased 0.03% point to 2.05% (1Q24: 2.02%), reversing the downward trend in the last 5 quarters. This is also helped by a higher CASA ratio of 51.5% (Mar 24: 50.6%). Loans grew at a faster pace of 1.5% over 1Q24.
It achieved the highest quarterly fee income in this quarter. The buoyant equity markets, and increased consumption demand lifted credit card spend, wealth management and loan-related fees.
UOB added S$3bn to wealth management AUM this quarter, maintaining the momentum in previous quarter. Total AUM for wealth management is S$182bn.
Asset quality remained healthy. Credit cost was flat at 24 basis points (1Q24: 23 basis points). Management guided that credit costs will land at the lower end of 25 to 30 basis points for FY24.
Integration of Citi operations in Malaysia, Thailand and Indonesia have completed. Vietnam is expected to complete in 2025. This could incur a further S$100m in costs, and roll off by 2Q25.
UOB’s CET1 ratio remains stable at 13.4%.
Beansprout’s take on UOB’s 2Q24 results
Investors are likely to view the results as neutral. Net profit growth of 0.8% is slightly behind market consensus’ estimate for a full year growth of 4.7%.
However, management of UOB is maintaining its previous guidance. It guided for a positive growth in total income for the full year, a low single-digit loan growth and double-digit fee growth.
We believe this may be achievable given the lower base in 2H23 and strong growth momentum in fee income.
We also believe net interest margin may be maintained in 3Q24, but ease slightly in 4Q24 when the Fed’s rate cut is set in motion.
UOB currently trades at a price-to-book valuation of 1.2x, above its historical average of 1.0x.
UOB is expected to offer a dividend yield of 5.3%, below the dividend yield of 5.9% for DBS, and dividend yield of 5.7% for OCBC.
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