Boost from investment income. Fees & commissions were 6.3% lower qoq at S$225m. Contributions from loans-related activities declined 34.2% qoq to S$50m as the 1Q09 number was boosted by lots of capital restructuring activities. 2Q09 performance was significantly boosted by a net gain of S$34m from trading activities and investment income of S$141m from financial instruments and S$63m from available-for-sale assets.
Huge general provision. Non-performing loan (NPL) ratio increased from 2.1% in 1Q09 to 2.4% in 2Q09 due to large corporations in Singapore and OECD countries. The general provision of S$151m was similar to last quarter’s but United Overseas Bank (UOB) made a large general provision of S$321m (about S$100m for loans, S$150m for investment securities and S$100m for foreclosed assets in Thailand).
Stronger balance sheet. Available-for-sale reserves recovered by another S$1.2b due to the recovery in the equity and bond markets. Thus, NAV/share increased from S$9.37 to S$10.14. Tier-1 capital adequacy ratio (CAR) improved marginally from 12.3% to 12.6% due to a 1.7% qoq decline in risk-weighted assets.
Pick-up in demand. Demand for loans has increased due to improved sentiment and a pick-up in the housing market. Applications for loans increased 50% qoq in 2Q09. However, management mentioned that margins look “toppish” and there is intense competition for housing loans. NPL ratio is expected to increase in 2H09 but likely to be at a slower pace.
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