The bank's performance was hit by declining margins and pre-emptive credit provisioning as the effects of the Covid-19 pandemic continues to devastate the global economy.
United Overseas Bank reported second-quarter net earnings of S$703 million ($513.41 million) – 18 percent down from the previous quarter and 40 percent down from the same period the year before, mainly due to lower margins and higher credit costs, according to its second-quarter earnings report, published on Thursday.
Earnings for the first half of the year stood at S$1.56 billion – 30 percent lower than a year ago. Net interest income decreased 6 percent year-on-year to S$3.05 billion as a result of declining margins alongside interest rate cuts, while net fee and commission income was 4 percent lower at S$960 million due to lower consumer spending and slower loan disbursement fees.
The board has recommended a dividend of 39 cents per share, with the scrimp scheme, which provides shareholders with the option to elect to receive new shares in lieu of part or all of the cash amount, applied. This move is in line with calls by the Monetary Authority of Singapore for local banks to conserve capital and moderate dividends.
Uncertain Environment
«Our strong balance sheet, robust capital and liquidity positions equip us well to navigate the uncertain macro environment ahead and in sharpening our service and digital capabilities,» Wee Ee Cheong, deputy chairman and chief executive officer, said in a statement.
Singapore entered a technical recession in the second quarter of the year, with the economy shrinking 12.6 percent year-on-year, following -0.3 percent growth in the first quarter, as a result of a partial lockdown and widespread closures of businesses to stem the spread of Covid-19.
DBS on Thursday reported a 22 percent year-on-year drop in Q2 net profit for the first quarter to S$1.25 billion. Oversea-Chinese Banking Corporation will release its earnings results tomorrow.
