This is why UOB's net profit surged 36% in 3Q12

Dividend income reached S$89m.

According to OCBC, UOB posted 3Q12 net earnings of S$707m, up 36% YoY and flat QoQ. This is above market expectations of S$653m, or a variance of S$54m.

Here's more from OCBC:

The main reason for this difference is the one-off surge in dividend income to S$89m for the quarter, up from S$34m in 2Q12 and S$13m in 3Q11.

As expected, the lending business was tough as net interest margin slipped, from 1.89% in 3Q11 and 1.92% in 2Q12 to 1.84% in 3Q12, down 8ppt from last quarter. This was very much in line with what DBS reported last week.

Fortunately, the noninterest side bucked the trend and grew both YoY and QoQ to S$693m, buoyed by strong YoY increase in both Fee & Commission income as well as Other Income.

Management highlighted its disciplined cost management and this led to almost flat cost-toincome ratio of 41.3%, same as previous quarter.

Guiding for high single-digit loans growth
The Loans/Deposits ratio fell in 3Q12, largely as deposits growth outpaced loans growth. Margin pressure is likely to remain. Management is guiding for high single-digit loans growth for 2013.

Management also expressed confident that expenses are under control and they are committed to remain prudent (in viewof the challenging conditions). It intends to tap on more cross-sell opportunities in the wholesale and wealth space, especially in its regional business.

The improved capital adequacy ratios also place the group in a stronger position as it enters into 2013 with impending more vigorous regulatory requirements.