UOB posted 4Q15 net earnings of S$788m, flat YoY and -8% QoQ, and in line with a Bloomberg poll of analysts at S$788m, resulting in full year net profits of S$3209m. However, this is slightly above our projection by S$20m. Net Interest Margin (NIM) improved from 1.69% in 4Q14 and 1.77% in 3Q15 to 1.79% this quarter.

Allowances for credit and other losses rose 15% YoY or 19% QoQ to S$190m in 4Q. UOB shared that its exposure to China amounted to S$21.1b or about 6.6% of its total assets. Of this, 65% is trade-related with bank counterparties and around 75% is with the top 5 domestic banks and policy banks. Its commodities exposure amounted to S$21.0b, about 10.3% of total loans or 6.6% of total assets.

Management has declared a final dividend of 35 cents, and together with the interim dividend of 35 cents and the special 80th Anniversary dividend of 20 cents, the full year’s payout amounted to 90 cents. We are maintaining our BUY rating and will adjust our estimates post the analysts’ briefing.

Source: OCBC Research - 16 Feb 2016