UOB posted 3Q16 net earnings of S$791m, down 7.8% YoY and 1.2% QoQ, and this is above both market and our expectations with consensus estimates at S$771m. The main reason for the variance between ours and the actual results was the stronger-than-expected Net Trading Income, which rose 39.4% YoY and 4.9% QoQ to S$227m.

Net Interest Income came in fairly flat at S$1230m, while Non-interest Income came off slightly to S$810m, giving Total Income of S$2040m. Net Interest Margin (NIM) improved marginally from 1.68% last quarter to 1.69% this quarter. Operating expenses fell QoQ to S$918m.

As expected, allowances rose this quarter, from S$161m in 2Q16 to S$185m this quarter. NPL ratio rose from 1.4% in 2Q16 to 1.6% this quarter. We will provide more details after the analyst briefing.

Prior to the results, our rating was a HOLD with a fair value estimate of S$19.61.

Source: OCBC Research - 28 Oct 2016

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