UOB Shares Slide Despite Profit Rebound

Singapore's United Overseas Bank suffered a sharp share price decline on Wednesday after its third-quarter earnings missed market forecasts, exposing concerns about lending profitability despite a substantial recovery in reported profit.

The bank recorded net profit of S$1.25 billion for the three months to September, more than double the S$443 million reported a year earlier. However, the result fell below analysts' expectations, with a Bloomberg survey forecasting S$1.38 billion. UOB shares dropped more than 5% during early trading, reflecting investor disappointment with its earnings outlook.

The increase in profit was flattered by unusually large credit provisions recorded during the comparable period last year. Underlying performance offered a mixed picture. Net fee income climbed 19% to a record S$733 million, supported by wealth management, cards and lending-related services. Net interest income grew just 1% to S$2.28 billion, while the bank's net interest margin narrowed to 1.68% from 1.82%. Management lowered its full-year margin expectations as funding costs remained elevated.

The results underline the challenges facing Singapore's major banks as competition for deposits constrains earnings from traditional lending. Growth in wealth management and transaction services is increasingly important, but may not fully offset the effect of narrower interest margins. With DBS and OCBC preparing their own quarterly results, UOB's performance has heightened scrutiny of whether Southeast Asian lenders can maintain profitability without relying on unusually favourable credit conditions or continued expansion in non-interest income.