UOB posted 1Q18 net earnings of S$978m, up 21% YoY and 14% QoQ, and slightly ahead of street expectations of S$966m. Better Net Interest Margin (NIM) together with healthy loan growth of 5% led to a new high of S$1.47b in Net Interest Income, which is a 13% improvement YoY. NIM rose from 1.73% in 1Q17 and 1.81% in 4Q17 to 1.84% in 1Q18.

Net fee and commission income increased 18% YoY to S$517m, supported by growth in wealth management (+30% YoY), fund management (+27% YoY) and loan-related fee income (+24% YoY). The expense-to-income ratio stood at 44.2%. NPL was at 1.7%, down from 1.8% in the previous quarter.

Allowances fell sharply from S$140m last quarter to S$80m this quarter. UOB’s share price has gained 14.2% YTD and is now trading close to our pre-result fair value. We will provide more update after the analyst briefing.

Meantime, we put our Buy rating and fair value of S$30.86 under review..

Source: OCBC Research - 3 May 2018