United Overseas Bank has posted a 21.7 percent drop in second quarter net earnings to 470 million dollars from a year ago, as the bank set aside more provisions for bad loans.

The bank recorded higher operating income in the quarter, with net interest income growing 3.9 percent and non-interest income edging up 0.1 percent.

But impairment charges surged 158 percent to 465 million dollars for the three months ended June as the lender set aside more provisions amid the global economic uncertainty.

Bad loans were also on the rise with the non-performing loan ratio rising to 2.4 percent in the second quarter, up from 2.1 percent in the first quarter.

But the bank says its asset quality remained sound and the credit deterioration wasn't as bad as what many had predicted.

Looking ahead, UOB CEO Wee Ee Cheong says the bank is more upbeat about prospects as global sentiments improve.

But he adds that there are still structural issues confronting the global system and the bottoming out process and economic recovery will be gradual.