United Overseas Bank Limited · SGX:U11
United Overseas Bank — Debt Investor Presentation (June 2018)
60 slides from United Overseas Bank's debt investor presentation, June 2018
Slide 1: UOB Group Fixed Income Investor Presentation
UOB Group Fixed Income Investor Presentation Strong Business Performance and Balance Sheet Position June 2018 Discla imer : Th is mater ial that follo ws is a prese ntat io n of genera l ba ckgrou nd informat ion ab out the Ba nk’s act ivities current at the date of the present at ion. It is informa
Slide 2: Agenda
Agenda 1. Overview of UOB Group 2. Strong UOB Fundamentals 3. Macroeconomic Outlook 4. Regulatory Developments 5. Resilience of the Singapore Housing Market 6. Overview of our Cover Pool and Covered Bond Program Appendix: A. Latest Financials B. Our Growth Drivers
Slide 3: Overview of UOB Group
Overview of UOB Group HtUOB
Slide 4: UOB Overview
UOB Overview Founding Key Statistics for 1Q18 Founded in August 1935 by a group of Chinese ■ Total assets : SGD364b (USD278b1) businessmen and Datuk Wee Kheng Chiang, ■ Shareholder’s equity : SGD38b (USD29b1) grandfather of the present UOB Group CEO, Mr. Wee Ee Cheong ■ Gross loans : SGD241b (USD184
Slide 5: A Leading Singapore Bank; Established Franchise in Core Market Segments
A Leading Singapore Bank; Established Franchise in Core Market Segments Group Retail Group Wholesale Banking Global Markets Best Retail Bank in Singapore1 Best SME Banking1 Strong player in Singapore dollar treasury instruments Strong player in credit cards and Seamless access to regional
Slide 6: Proven Track Record of Execution
Proven Track Record of Execution UOB Group’s management has a proven track record in steering the Group through various global events and crises. Stability of management team ensures consistent execution of strategies Disciplined management style which underpins the Group’s overall resilience
Slide 7: Expanding Regional Banking Franchise
Expanding Regional Banking Franchise Extensive Regional Footprint with c.500 Offices Profit Before Tax by Region (SGD m) MYANMAR GREATER CHINA 2 offices 28 offices1 39% of VIETNAM Group PBT 469 THAILAND 1 office 154 offices 324 367 301 419 PHILIPPINES 305 366 300 29 1 office 99 61 71 218 MALAYSIA 15
Slide 8: Strong Capital and Leverage Ratios
Strong Capital and Leverage Ratios Reported Common Equity Tier 1 CAR, Tier 1 CAR and Total CAR 23.7 22.7 22.7 21.0 20.7 19.4 18.8 (Common Equity 18.0 17.6 16.5 16.5 16.4 16.4 16.4 16.0 16.0 15.8 15.8 15.0 14.9 14.8 14.8 14.8 14.5 14.4 14.2 Tier 1 CAR; 14.0 13.7 13.6 13.6 13.1 13.0 12.7 12.4 12.4 12.
Slide 9: Competitive Against Peers
Competitive Against Peers Standalone Efficient Cost Competitive Well-Maintained Strength Management ROAA1 Liquidity Moody’s S&P Fitch Moody’s baseline Costs/income Return on average Loan/deposit credit assessment ratio assets1 ratio Aa1 AA– AA– UOB a1 44.2% 1.09% 86.7% Aa1 AA– AA– OCBC a1 44.2% 1.17
Slide 10: Strong Investment Grade Credit Ratings
Strong Investment Grade Credit Ratings Aa1 / Stable / P-1 AA– / Stable / A-1+ AA– / Stable / F1+ Capital good by global standards Well-established market position, strong Sound capital and high loan-loss buffers Deposit-funded and liquid balance sheet funding and prudent management record
Slide 11: Strong UOB Fundamentals
tit UOB Strong UOB Fundamentals 11
Slide 12: Strong UOB Fundamentals
Strong UOB Fundamentals Strong Proven track record in steering the bank through various global events and Management with crises Proven Track Record Stability of management team ensures consistent execution of strategies Consistent and Healthy revenue growth momentum, with new highs in both ne
Slide 13: Disciplined Balance Sheet Management
Disciplined Balance Sheet Management Improved balance sheet efficiency Optimising RWA to drive higher RoRWA1 – Result of ongoing efforts to optimise RWA RoRWA1 1.40% 1.51% 1.61% 1.69% 1.69% Portfolio quality broadly stable – Uptick in NPL ratio to 1.8%; 4Q16 1Q17 2Q17 3Q17 4Q17 accelerated recog
Slide 14: Diversified Loan Portfolio
Diversified Loan Portfolio Gross Customer Loans by Geography 1 Gross Customer Loans by Currency Others Singapore Others Greater 11% 53% IDR 15% SGD China 2% 48% 14% THB Indonesia 6% 4% MYR Thailand 10% 6% Malaysia USD 12% 19% Gross Customer Loans by Maturity Gross Customer Loans by Industry Professi
Slide 15: Net Interest Income Rose on Growth in Loans and Margins
Net Interest Income Rose on Growth in Loans and Margins Net Interest Income (NII) and Margin 2,200 3.00% 3.00% 2.26% 2.20% 2.14% 2.14% 2.14% 2.15% 2.14% 2.18% 8,500 2.06% 2,000 2.00% 2.00% 7,500 1.71% 1.77% 1.71% 1.77% 1.73% 1.75% 1.79% 1.81% 1.84% 1,800 1.00% 1.00% 0.82% 0.82% 0.93% 0.94% 6,500 0.7
Slide 16: Broad-based Increase in Loan Portfolio
Broad-based Increase in Loan Portfolio QoQ YoY Mar-18 Dec-17 +/(–) Mar-17 +/(–) Gross Loans SGD b SGD b % SGD b % By Geography Singapore 129 128 +1 125 +3 Regional: 89 85 +5 81 +10 Malaysia 29 27 +7 26 +12 Thailand 16 15 +4 14 +14 Indonesia 10 11 –2 11 –8 Greater China 34 32 +5 30 +13 Others 24 23 +
Slide 17: New NPA Formation Down to Normalised Levels amid Benign Credit Conditions
New NPA Formation Down to Normalised Levels amid Benign Credit Conditions (SGD m) 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 NPA at start of 3,066 3,106 3,164 3,632 3,480 3,543 3,587 3,919 4,389 period New NPA 344 802 780 387 424 537 799 1,167 416 Upgrades, recoveries and (235) (548) (201) (320) (
Slide 18: NPL ratios Declined Mildly to 1.7%
NPL ratios Declined Mildly to 1.7% NPL ratio 1.5% 1.5% 1.6% 1.8% 1.7% NPLs (SGD m) 3,399 3,466 3,748 4,211 4,138 4,500 Others 4,000 303 290 132 150 272 3,500 694 Greater China 285 244 692 257 3,000 304 261 608 439 Indonesia 485 623 641 2,500 386 585 603 Thailand 392 2,000 370 563 487 518 Malaysia 1,
Slide 19: Lower Credit Costs amid Benign Credit Conditions
Lower Credit Costs amid Benign Credit Conditions Allowances on Loans 2,000 600 150bp 125bp 150bp 1,800 500 100bp 100bp 1,600 61bp 45bp 49bp 1,400 37bp 32bp 32bp 50bp 400 30bp 50bp 1,200 12bp 32bp 28bp 32bp 32bp 32bp 1,000 19bp 0bp 300 17bp 0bp 12bp 11bp 800 200 (50)bp (50)bp 600 400 626 655 693 660
Slide 20: Adequate NPL Reserve Coverage Ratios
Adequate NPL Reserve Coverage Ratios 300% Total ECL* or Allowances / 244% 241% 236% Unsecured NPL (%) 250% 195% 200% 178% Total ECL* or Allowances / 118% 150% 114% 108% NPL (%) 91% 81% 100% Stage 3 ECL* or Specific 50% Allowance / Total NPL (%) 0% 42% 38% 39% 44% 43% 4,500 4,000 Stages 1 and 2 ECL*
Slide 21: Strong Capital and Leverage Ratios
Strong Capital and Leverage Ratios 7.6% 7.8% 7.7% 8.0% 8.2% Leverage ratio 1 5.0% 4 Total CAR 2 17.3% 17.8% 17.8% 18.7% 18.8% 0% 19.0% 4 17.0% 2.5% 2.4% -20000% 3.5% 3.0% 1.1% 1.5% 4 Tier 2 CAR 2 15.0% 3.5% 0.5% 0.5% -40000% 13.0% 0.6% Tier 1 CAR 2 11.0% 4 -60000% CET1 CAR 2 13.8% 14.3% 15.1% 14.9%
Slide 22: Stable Liquidity and Funding Position
Stable Liquidity and Funding Position 111% Net stable funding 1.15 ratio (%) 1.05 92.3% 94.2% SGD loan-deposit ratio 0.95 89.9% 91.9% (LDR) (%) 87.8% 0.85 Group LDR (%) 86.7% 86.1% 85.8% 85.1% 86.7% 0.75 75.7% USD LDR (%) 0.65 66.5% 65.3% 66.2% 63.9% 0.55 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 250% 200%
Slide 23: Macroeconomic Outlook
itt UOB Macroeconomic Outlook 23
Slide 24: Southeast Asia: Resilient Key Markets
Southeast Asia: Resilient Key Markets Significantly Higher Foreign Reserves Healthy Current Account Balances (USD billion) (% of GDP) 283 19.5 215 15.3 172 75 109 128 105 8.1 30 2.2 Singapore Thailand Indonesia Malaysia –2.0 –1.5 –1.8 –5.5 1998 2018 (latest available) Singapore Malaysia Thailand Ind
Slide 25: Southeast Asia Banking Sectors: Strong Fundamentals Remain Intact
Southeast Asia Banking Sectors: Strong Fundamentals Remain Intact Robust Capital Positions Adequate Loan/Deposit Ratio Healthy Reserves (Common equity Tier 1 capital adequacy (Loan/deposit ratio, in %) (NPL reserve cover, in %) ratio, in %) 21.7 Thailand Singapore 95.5 Indonesia Indonesia Thailand 8
Slide 26: China’s Growth Slower but Low Risk of Hard Landing
China’s Growth Slower but Low Risk of Hard Landing While China’s GDP growth rate is slowing, the annual increase in absolute GDP has been stable. The Chinese economy has its underlying momentum, supported by rebalancing reforms and steady job market. Low central government debt underpins China
Slide 27: Global Trade Tension Negative for Small Open Economies in Asia
Global Trade Tension Negative for Small Open Economies in Asia Direct Vulnerability to US Exports: Indirect Vulnerability to US Exports via China: China, Japan, Vietnam and India Stand Out Taiwan, followed by Korea, Singapore & Malaysia 200 200 Hong Kong Hong Kong Singapore Singapore 160 160 Total e
Slide 28: Implication on Regional Policy Rates
Implication on Regional Policy Rates 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18f 3Q18f 4Q18f US 10-Year Treasury 1.59 2.44 2.39 2.30 2.33 2.40 2.74 2.80 3.00 3.20 US Fed Funds 0.50 0.75 1.00 1.25 1.25 1.50 1.75 2.00 2.00 2.25 SG 3M SIBOR 0.87 0.97 0.95 1.00 1.12 1.50 1.45 1.70 1.70 1.85 SG 3M SOR 0.67
Slide 29: Revenue Potential from ‘Connecting the Dots’ in the Region
Revenue Potential from ‘Connecting the Dots’ in the Region Industry’s Potential Connectivity Revenue Industry’s Potential Connectivity Revenue (2020) (SGD b) (SGD b) CAGR c$53b Markets where UOB has a presence c$11b +6% Total Singapore Thailand c$2b c$2b c$37b c$7b +6% Hong Wealth Kong c$8b c$3b c$5
Slide 30: Regulatory Developments
tit UOB Regulatory Developments 30
Slide 31: Basel III across the Region
Basel III across the Region BCBS Singapore Malaysia Thailand Indonesia Hong Kong China Minimum CET1 CAR 4.5% 6.5%1 4.5% 4.5% 4.5% 4.5% 5.0% Minimum Tier 1 CAR 6.0% 8.0%1 6.0% 6.0% 6.0% 6.0% 6.0% Minimum Total CAR 8.0% 10.0%1 8.0% 8.5% 8.0% 8.0% 8.0% Full Compliance Jan-15 Jan-15 Jan-15 Jan-13 Jan-14
Slide 32: Banking Regulations Still Evolving
Banking Regulations Still Evolving Year ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 ’24 ’25 ’26 ’27 Basel III Phased-in Full capital ratios Leverage ratio Disclosure phase Start LCR1 Phased-in Full NSFR2 Start SACCR3 Start FRTB4 Start TLAC5 Phased-in Full Basel IV6 Phased-in Full IFRS 9 Start Banks
Slide 33: Impact of Basel IV Likely to be Manageable
Impact of Basel IV1 Likely to be Manageable Retail credit Wholesale credit Others LGD2 floor of Retail Mortgage cut LGD2 and PD3 floors introduced for to 5% from 10% QRRE4 and Other Retail Unsecured corporate FIRB5 LGD2 cut CCF6 for unconditional cancellable to 40% from 45% commitments raised to 10%
Slide 34: Resilience of the Singapore Housing Market
Resilience of the Singapore Housing Market 34
Slide 35: Singapore GDP Growth Likely to Moderate in 2018
Singapore GDP Growth Likely to Moderate in 2018 1Q18 GDP grew 4.3% yoy (4Q17: +3.6%) and was MAS Normalised SGD NEER in Apr’18 still supported mainly by expansion in the electronics and precision engineering clusters. Positive spillover 133 Easing #1 Easing #2 Easing #3 MAS kept neutral stance unc
Slide 36: Conducive Macro Conditions Underpin Singapore Property Market
Conducive Macro Conditions Underpin Singapore Property Market Regional House Price Indices over Last 10 Years Low Unemployment vs Global Peers (1Q18 = 100) (%) HK, 279 MY, 219 6.9 EU, 7.3 5.0 US, 4.1 AU, 163 CH, 3.9 HK, 2.8 100 TH, 122 1.6 SG, 1.8 SG, 113 1Q08 1Q10 1Q12 1Q14 1Q16 1Q18 2007 2009 2011
Slide 37: Prudent Policies for Sustainable Prices
Prudent Policies for Sustainable Prices Residential Property Price Indices 160 140 120 2013: Introduction of TDSR 100 80 2008: Onset of 2011: Introduction of ABSD 1997: Asian Crisis 60 2001: Dot Com Bubble Credit Crisis Collapses 2003: SARS Outbreak 2010: Introduction 40 2002: HDB building programme
Slide 38: Overview of our Cover Pool and Covered Bond Program
Overview of our Cover Pool and Covered Bond Program 38
Slide 39: Our Cover Pool Profile
Our Cover Pool Profile Overview of Cover Pool (as of Mar ‘18) Current Loan Balances Mainly <S$1m Number of Mortgage Loans 11,801 3% 3% 3% 3% 3% 3% 4% 6% 6% 5% 7% 6% 6% 7% (SGD ‘000) Total Current Balance (SGD) 7.8 billion 17% 16% 16% 17% >4,000 17% 17% Average Current Loan Balance (SGD) 659,182 18%
Slide 40: Cover Pool has Been Stable
Cover Pool has Been Stable Primarily Apartments / Condominums Diversified Geographical Distribution 5% 5% 5% 5% 5% 5% 6% 11% 11% 11% 11% 11% 11% 11% 4% 4% 4% 5% 4% 4% 4% Others 9% 9% 9% 9% 9% 10% 11% 19% 19% 19% 19% 19% 19% 18% Intermediate Rest of Central Terrace Region (RCR) Semi-Detached House Co
Slide 41: Cover Pool has Been Stable
Cover Pool has Been Stable Majority Owner Occupied Loans Mainly for Purchases 24% 25% 26% 26% 27% 27% 26% Refinance, 18% Investment 76% 75% 74% 74% 73% 73% 74% Owner occupied Purchase, 82% Sep '16 Dec '16 Mar '17 Jun '17 Sep '17 Dec '17 Mar '18 Well Seasoned Portfolio (in months) Stable Profile for
Slide 42: Covered Bond Program Summary
Covered Bond Program Summary USD8,000,000,000 Global Covered Bond Programme Issuer United Overseas Bank Limited Issuer Long Term Rating Aa1 (stable) / AA- (stable) / AA- (stable) (Moody’s / S&P / Fitch) Issuer Short Term Rating P-1 (stable) / A-1+ (stable) / F1+ (stable) (Moody’s / S&P / Fitch) Prog
Slide 43: Covered Bond Structure
Covered Bond Structure ■ Notwithstanding that CPF’s consent is required for the transfer or assignment of mortgages relating to CPF Loans, no such consent is required for a declaration of trust over mortgages relating to CPF Loans. The Seller is acting as the Assets Trustee and the CPF Loans are hel
Slide 44: Appendix A: Latest Financials
Appendix A: Latest Financials 44
Slide 45: FY17 Financial Overview
FY17 Financial Overview Net Profit After Tax1 (NPAT) Movement, FY17 vs FY16 (SGD m) 213 22 313 537 133 104 136 3,096 +9% 3,390 +11% +13% +2% +9% +23% >100% +20% FY16 net Net interest Net fee1 Other non- Expenses1 Total Share of Tax and FY17 net profit after income income interest allowances profit o
Slide 46: 1Q18 Financial Overview
1Q18 Financial Overview Net Profit After Tax1 (NPAT) Movement, 1Q18 vs 4Q17 (SGD m) 61 6 16 10 8 18 40 +14% 978 855 +1% +2% –7% –4% –43% +29% –7% 4Q17 net Net interest Net fee1 Other non- Expenses1 Total Share of Tax and 1Q18 net profit after income income interest allowances profit of non- profit a
Slide 47: Steady Non-Interest Income Mix Underpins Diversity
Steady Non-Interest Income Mix Underpins Diversity Non-Interest Income and as a % of Total Income 50.0% 50.0% 5,300 37.2% 36.9% 35.9% 35.4% 1400 36.5% 35.9% 40.0% 34.9% 34.5% 34.1% 40.0% 4,800 30.0% 30.0% 4,300 1200 20.0% 20.0% 3,800 21.4% 21.0% 21.3% 21.9% 21.4% 21.2% 22.0% 22.8% 23.2% 1000 10.0% 1
Slide 48: Broad-based Focus in Fee Income, which Reached a New Record
Broad-based Focus in Fee Income, which Reached a New Record Breakdown of Fee Income (SGD m) (SGD m) 2,161 602 585 80 600 20 1,931 551 18 2,000 1,883 517 272 508 18 72 1,749 74 93 72 500 23 21 68 59 263 148 36 258 66 41 66 35 273 134 1,500 121 36 471 400 37 141 113 133 122 498 482 102 114 490 300 1,0
Slide 49: Pacing Growth in Operating Expenses, with Maintaining a Stable CIR
Pacing Growth in Operating Expenses, with Maintaining a Stable CIR Operating Expenses and Expense / Income Ratio 6,500 50.0% 1,800 50.0% 46.0% 44.0% 43.7% 43.8% 44.2% 43.0% 45.0% 1,600 43.2% 45.0% 5,500 40.6% 41.6% 40.0% 1,400 40.0% 4,500 35.0% 1,200 35.0% 3,739 3,425 1,027 3,356 987 3,500 30.0% 1,0
Slide 50: IT Investments Shifting Towards “Changing the Bank”
IT Investments Shifting Towards “Changing the Bank” Connectivity and Digital for Focus Centralisation and Standardisation Growth Cumulative 2009 to 2013 2014 to 2017 IT investments (c$0.6b) (c$1.2b) Total IT investments Global Market Platform: Customer flow income +12%1 28% Cash Management Platform:
Slide 51: Higher Dividends for 2017
Higher Dividends for 2017 20 20 5 45 35 35 50 35 35 35 20 2014 2015 2016 2017 Net dividend per ordinary share (¢) Interim Final Special UOB 80th Anniversary Payout amount (SGD m) 1,201 1,444 1,135 1,661 Payout ratio (%) 37 45 37 49 Payout ratio (excluding 35 35 37 39 special/one-off dividends) (%) N
Slide 52: Appendix B: Our Growth Drivers
Appendix B: Our Growth Drivers 52
Slide 53: Our Growth Drivers
Our Growth Drivers Provides us with ability to serve expanding regional needs of our Realise Full customers Potential of our Integrated Platform Improves operational efficiency, enhances risk management, seamless customer experience and faster time to market Global macro environment remains un
Slide 54: Wholesale Banking: Diversifying Income Mix to Grow RoRWA
Wholesale Banking: Diversifying Income Mix to Grow RoRWA Income from Non-Loan: +7% CAGR1 Income from Transaction Banking: +9% CAGR1 % Non- % TB loan 47% 49% 52% income 32% 33% 36% income 1,822 1,811 1,707 2,365 2,263 2,334 S$m 1,611 1,729 1,855 S$m 470 449 501 629 726 798 FY15 FY16 FY17 FY15 FY16 FY
Slide 55: Focus on Sectors with Highest Trade and Connectivity Flows
Focus on Sectors with Highest Trade and Connectivity Flows One of 1st sectors launched: Financial Institution segment showing good progress Strong Income Diversified Building Regional Growth Product Mix Connectivity 48% 40% 57% 52% 60% roup G FIG2 2017 Income from Wholesale outside Singapore
Slide 56: Retail Banking: Growth Momentum Gaining Traction
Retail Banking: Growth Momentum Gaining Traction Gross Loans (Group Retail1): +7% CAGR2 Income (Group Retail1) +9% CAGR2 S$bn S$m 104 3,988 98 3,647 91 3,359 FY15 FY16 FY17 FY15 FY16 FY17 Wealth Management3 Income: +14% CAGR2 Segment RoRWA4 – 0.01% pt YoY AUM S$85b S$93b S$104b +35% 513 334 +14% 381
Slide 57: Harnessing Technology & Innovation to Improve Productivity & Customer Experience
Harnessing Technology & Innovation to Improve Productivity & Customer Experience UOB MIGHTY CONTACTLESS MIGHTY SECURE MIGHTY FX debuts PAYMENT for use on mobile Trade, Transact at general ticketing phone as security token and Travel at your machines FIRST IN SINGAPORE preferred FX rate. Nov ’15 ‘16
Slide 58: Managing Risks for Stable Growth
Managing Risks for Stable Growth Prudent approach has been key to delivering sustainable returns over the years Manage concentration risk Institutionalised framework through Group Risk Appetite Maintain Statement (GRAS): Nurture core balance talent sheet – Outlines risk and return strength objec
Slide 59: Sustainability Reporting a Multi-Year Journey, with Progress Recognised
Sustainability Reporting a Multi-Year Journey, with Progress Recognised Singapore Ranking 2017: 100 2017: 49 Best Inaugural Rank 11th 2017: 7th (Average) Sustainability 2016: 93 2016: 44 Report Rank 14th 2015: 27th (Laggard) (Mainboard), 2017 The Singapore Sustainability The SGTI is a collaboration
Slide 60: Thank You
Thank You tt UOB RIGHT BY YOU
United Overseas Bank — Debt Investor Presentation (June 2018) on 6ix