(Bloomberg) -- United Overseas Bank Ltd. led Singapore bank stocks to record highs Friday after delivering a hefty profit beat, led by wealth and trading gains.
UOB rose more than 9% as it reported third-quarter profit that climbed to S$1.64 billion ($1.24 billion). The bank also signaled the potential for more returns to investors through a share-buyback program. Oversea-Chinese Banking Corp.’s stock rose almost 2%.
The gains reflect investors’ optimism on Singaporean lenders, which have benefited from wealth flows into the city-state, one of the world’s largest offshore fund hubs. Fees from managing client money have buoyed earnings at the banks, led by DBS Group Holdings Ltd., the country’s largest.
UOB, which has between S$2 billion and S$2.5 billion in excess capital, will consider a share repurchase plan as well as higher dividends, Chief Executive Officer Wee Ee Cheong told reporters after an earnings briefing. Shares of OCBC, also endowed with hefty capital surplus, rose to the highest ever, despite the bank saying it has no such plans.
“If we can’t utilize the capital for growth, we’ll have to find some ways to return it back to shareholders,” UOB Chief Financial Officer Lee Wai Fai said. “Definitely a share buyback is among the options.”
Non-interest income at OCBC and UOB grew at double-digit percentage points, the firms said in filings to the exchange on Friday. That boosted net income even when the lending business is getting hit with tighter margins.
Buyback Surprise
On Thursday, DBS, the region’s top lender by assets, reported record profit and unveiled a surprise share buyback program that sent the stock to an all-time high. The trio has been expanding services that serve the rich, building the business that generates extra fees even when interest rates head lower.
The three Singapore banks also have been expanding new funds that overseas clients parked with them this year, helping to boost their assets under management.
“The strong improvement in our wealth management business and trading income reflected the progress we have made in advancing our corporate strategy,” OCBC’s Chief Executive Officer Helen Wong said in a statement. “Looking ahead, we will continue to pro-actively manage our balance sheet to prepare for a lower interest rate environment.”
UOB also said it undertook deposit cost management to mitigate interest rate headwinds.
The US Federal Reserve on Thursday cut interest rates by a quarter percentage point. That followed the half-point reduction in September, extending efforts to keep the American economic expansion on solid footing.
For the Singapore banks, the shift in the business drivers are starting to be clear.
OCBC’s net income rose 9% to S$1.97 billion for the three-month period ended Sept. 30, roughly in line with analysts’ estimates of S$1.91 billion. Trading gains more than doubled and wealth fees surged. Net interest income slipped 1%.
--With assistance from Manolo Serapio Jr..
(Updates with comment from earnings briefing throughout)
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