United Overseas Bank said its first quarter net profit fell 12.6 percent to S$612 million due to weakness in its net-interest and non-interest income streams.

That was down from the S$700 million posted a year earlier, which included one-time gains on the disposal of long-term investments.

Excluding the one off gains a year ago, net profit fell 1 percent on-year in the first quarter of this year, but rose 11 percent compared to Q4.

Singapore’s third-largest bank by assets also saw revenue for the quarter falling 5.3 percent on-year to S$1.42 billion.

Net interest income fell 3.2 percent to S$871 million for the three months ended March 31st compared to a year ago.

“Whilst the global economy continues to grapple with various shocks, our core markets remain buoyant, reflecting the strong regional economic fundamentals and rising affluence in Asia,” said Mr Wee Ee Cheong, the UOB Group’s Deputy Chairman and Chief Executive Officer.

“We remain committed to serving the rising intra-regional needs of our customers and leveraging our regional platform to tap the growing affluence in the region. We will continue to focus efforts on harmonising systems and processes and providing our customers with a positive, seamless experience across borders,” he said.

Banks in Singapore, in general, are facing pressure on loan profitability, as Singapore’s low borrowing rates crimp margins.

UOB had said in its annual report for 2010 that rising competition and excess funds in the banking system may further squeeze loan margins this year.

Mr Kenneth Ng, an analyst at CIMB Research, said it is likely that regional loan growth and sustained fee income growth would make up for an environment of cost pressures.

He added that as higher-interest business loans pick up, the worst of the margin decline should taper off significantly. – CNA