By Yantoultra Ngui

SINGAPORE (Reuters) -Shares of Singapore's United Overseas Bank, or UOB, hit a record high on Wednesday after it posted a 9% rise in fourth-quarter net profit that beat expectations and announced a S$3 billion ($2.24 billion) package to return surplus capital to investors.

The stock rose as much as 1.4% to touch S$39.20 per share in early trade before declining 0.1% to S$38.63 amid a relatively flat Singapore's benchmark stock index.

"Our long term investments in the region are paying off with early results, the momentum is picking up, and we expect to see sustained revenue growth this year," UOB CEO Wee Ee Cheong said in an earnings briefing.

UOB, Singapore's third-biggest bank, said October-December net profit climbed to S$1.52 billion ($1.13 billion) from S$1.40 billion a year earlier on the back of higher net interest income supported by loan growth.

That beat the mean estimate of almost S$1.46 billion from four analysts polled by LSEG.

UOB, which is also Southeast Asia's third-largest bank by assets, expected its 2025 cost-to-income ratio to be around 42%, the top end of the 41% to 42% range it had projected in November.

Other than that, the bank kept its outlook for 2025, according to Wee's presentation slides accompanying the fourth-quarter earnings.

UOB's results followed that of larger peer DBS Group, which last week posted a 10% year-on-year jump in fourth-quarter net profit that met expectations and announced a dividend capital return plan, sending shares to a record high.

Singaporean banks were forecast to post stronger profits for the fourth quarter, but growth could take a hit this year as U.S. President Donald Trump's trade tariffs and other policies threaten to undermine the global economy, analysts said.

Alongside its results, UOB announced a capital return package to distribute surplus capital over the next three years. That includes a special dividend of 50 Singapore cents a share in 2025 and a S$2 billion share buyback programme.

It declared a final dividend of 92 Singapore cents per share for 2024, versus the 85 Singapore cents announced during the same quarter a year ago for 2023.

Its net interest margin, a key gauge of profitability, narrowed slightly to 2.00% in the fourth quarter from 2.02% in the same period a year earlier.

"We hope we maintain NIM at the current 2% level," UOB Group Chief Financial Officer Lee Wai Fai said in the briefing.

Lee, who will retire in April after serving two decades in the role, added that UOB expected the U.S. Federal Reserve to cut interest rates only once this year due to the U.S. strong economy and Trump's policies, which some economists believe will be inflationary.

Rival Oversea-Chinese Banking Corporation is scheduled to report its financial results on February 26.

($1 = 1.3420 Singapore dollars)