SINGAPORE (April 30): United Overseas Bank reported 1Q2015 earnings of $801 million, up 1.6% from a year earlier, with a rise in impairment charges and operating costs partly offsetting higher fee income and loan growth.

Impairment charges were higher across its markets in Southeast Asia, up 7.6% to $169 million, on the back of a larger loan book.

UOB's non-performing loan ratio edged up to 1.2% from 1.1%.

Net interest income increased 8.3% to $1.2 billion as loans grew across most sectors and regions.

Net interest margin inched up to 1.76% from 1.73% on improved loan pricing and higher securities yield.

Non-interest income grew 17.5% to $755 million on higher contributions from all business lines.

Total operating expenses were also higher, up 12.9% at $852 million, driven by staff and IT expenses.

Profit contributions from associates fell to $4 million from $43 million due to a divestment gain in 1Q2014.

Compared to 4Q2014, UOB's March-quarter earnings rose 1.9%.

Of the three Singapore banks, UOB stood out for being able to drive net interest margins higher both y-o-y and q-o-q, according to Maybank Kim Eng analyst Ng Wee Siang.

UOB's organic loan growth of 2% q-o-q and 7.8% y-o-y in 1Q2015 was also higher than its peers', he noted.

"This reflects UOB's lower reliance on China for growth."

Still, the bank's rising non-performing loans in Southeast Asia could be a concern, according to CIMB analysts Kenneth Ng and Jessalynn Chen.

"Though UOB’s net interest margin expansion was impressive, we continue to be concerned about asset quality issues in Asean," they wrote in a post-results report, noting that its non-performing loan ratios in Thailand and Indonesia rose 10 and 20 basis points respectively during the quarter.

"Indonesia remains a tough spot, with 2Q expected to remain weak as UOB continues to aggressively relook the portfolio and clean up its book," they said.