SINGAPORE Feb 24 (Reuters) - Shares of United Overseas Bank Ltd fell as much as 3.2 percent, the biggest intra-day drop since November, after results from the smallest of Singapore's three banking groups came below market expectations.
By 0411 GMT, UOB shares were down 2.2 percent at S$18.00 in a flat broader market.
"UOB's headline result came in under market expectation, so there was the natural inclination to sell off stocks that don't deliver on the bottom line," said Derek Ovington, an analyst at CLSA Asia-Pacific Markets.
"But in my view the underlying result was high quality," said Ovington, who is a five-star rated analyst for the accuracy of his earnings estimates on UOB, according to Thomson Reuters StarMine.
StarMine awards the top 10 percent of analysts five stars and the next 23 percent four stars.
UOB reported net profit of S$558 million ($443 million) in the three months ended December, down from S$706 million a year ago. The results lagged the S$575 million average estimate of six analysts polled by Reuters.
The bank's profit fell due to lack of one-off gains and as it booked losses on its European debt exposure.
"They had a big increase in net interest margin and solid non-interest income. The area where they underperformed market expectation was on credit charges, but DBS and OCBC were also seeing rising credit charges," Ovington said.
Citigroup said it was impressed by UOB's improved funding strength, which should provide a strong platform to deliver the Singapore bank's target low-teens loan growth in 2012.
Citi raised its target price on UOB to S$17.70 from S$15.30, though it has a sell rating on the stock. (Reporting by Mark Tay and Eveline Danubrata; Editing by Anshuman Daga)