UOB posted 4Q18 net earnings of S$916m, up 7% YoY and down 12% QoQ. This brings full year earnings to S$4008m, just slightly below Bloomberg consensus of S$4038m. The weakness in 4Q18 earnings is widely expected, especially with the weakness in global markets late last year.

4Q18 Net Interest Income rose 10% YoY and 1% QoQ to S$1461m. However, Noninterest Income was down 21% YoY and 17% QoQ to S$607m. Net Interest Margin eased off 1bp from the last quarter to 1.80% this quarter (1.77% in FY17 and 1.82% in FY18).

Allowances went up from S$34m in the previous quarter to S$128m. NPL ratio came off from 1.60% last quarter to 1.5% this quarter.

As we have earlier expected, the group has sweetened the dividend payout this year with a special dividend of 20 cents, bringing final dividend to 70 cents and full year to $1.20 (versus total of S$1.00 in FY17).

We are maintaining our BUY rating and will provide more information after the analyst’s briefing later this morning.

Source: OCBC Research - 22 Feb 2019