+ NII spiked 53% YoY; NIM surged by 66bps. NII grew 53% YoY, despite a slowdown of loans growth to 3% YoY, while NIM surged 66bps YoY to 2.22% (QoQ: 1Q22: +2bps, 2Q22: +9bps, 3Q22: +28bps, 4Q22: +27bps). Loan growth YoY was broad-based across most territories, while the consolidation of Citi assets added 11% to the ASEAN loan book in 4Q22. UOB has maintained its guidance of mid-single digit loan growth for FY22e.
+ Other non-interest income increased by 62%. Other NII increased 62% YoY largely due to the higher customer-related treasury income which was driven by hedging demands. However, other NII fell 34% QoQ as it normalized after an exceptional 3Q22 that benefitted from market volatility.
+ New NPAs fall 42% YoY. New NPA formation fell by 42% YoY to S$395mn as asset quality stabilised during the quarter. The NPL ratio remained stable YoY at 1.6%. Asset quality remained resilient with SP/NPA stable at 34%. 4Q22 NPA coverage is at 98% and unsecured NPA coverage at 207%.
– Fee income continues to decline. Fees fell 16% YoY largely due to lower wealth and fund management fees as investor sentiment remained subdued alongside a seasonally softer quarter. Loan-related fees also fell 17% YoY this quarter. Nonetheless, credit card fees were higher 40% YoY mainly from higher customer spends which were boosted by the Citi consolidation.
– Credit costs increase due to higher SPs. Total allowances rose by 84% YoY to S$173mn mainly due to specific allowance increasing by 49% YoY to S$253mn on a few non-systemic accounts despite a general allowance write-back of S$80mn during the quarter (4Q21: write-back of S$76mn). This resulted in credit costs increasing by 9bps YoY to 21bps. Nonetheless, total general allowance for loans, including RLARs, was prudently maintained at 0.9% of performing loans. Full year FY22 credit cost was unchanged at 20bps and UOB has guided for credit cost of 20-25 bps for FY23e.
– Expenses up 29% YoY. Excluding one-offs, expenses rose 29% YoY to S$1,418mn in 4Q22, at the upper end of UOB’s guidance for FY22. The increase was mainly due to higher variable bonuses and pay adjustments for staff to remain more competitive and prevent the outflow of staff. IT-related expenses also increased during the quarter. Nonetheless, the cost-to-income ratio (CIR) improved 2.4% YoY to 42.6%, with full-year FY22 CIR at 43.4%. UOB has guided for a similar CIR of 43% – 44% for FY23e, and to trend below 42% by FY24e.