Things you didn't know about UOB's latest results

Investors want clarity on 6 things.

According to CIMB, at a post-results luncheon with UOB’s senior management, the issues that investors wanted clarity on included 1) the trends driving non-interest income growth and their sustainability, 2) UOB’s view on China, 3) why UOB had not been more aggressive on trade, 4) the direction of margins, 5) the areas for potential asset quality problems and the stress tests that UOB has done, and 6) its view on M&A growth.

On non-NII, UOB explained that other than the rise of intra-regional trade as a macro force aiding fee income from wholesale banking, the wealth management (WM) business is also driving fee growth from retail.

Here's more from CIMB:

The profitability drivers of the consumer side of the business are moving away from loans to fee income and this has been helped by the market being ready for products and a growing sales platform to distribute WM products and bancassurance.

For the trade business, UOB noted that the arbitrage opportunity for onshore-offshore trade is gone and the profitability of the trade business has been competed to very low levels.

It is involved in the business, just not as big as some competitors. Management believe that margins should stabilise.

Factors that can drive a saner level of loan pricing include 1) rising funding costs across the region, 2) ASEAN regulators telling banks to raise GPs beyond levels prescribed by Basel, adding to cost, and 3) increased compliance costs.

All these can add to capital and liquidity cost so it is reasonable to expect less cut-throat pricing. There was an opportunity for the industry to tweak up mortgage pricing on refinancing packages, but that is now less after debt servicing rules have been relaxed.