United Overseas Bank Limited · SGX:U11
United Overseas Bank — Morgan Stanley Asia Pacific Summit 2015
48 slides from United Overseas Bank's conference presentation, November 2015
Slide 1: UOB Group: Sustained Growth in Core Income; Strong Balance Sheet Position
UOB Group Sustained Growth in Core Income; Strong Balance Sheet Position November 2015 Disclaimer : This material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation. It is information given in summary form and does not
Slide 2: Agenda
Agenda 1 Overview of UOB Group 2 Macroeconomic Outlook 3 Strong UOB Fundamentals 4 Our Growth Drivers 5 Latest Financials 2
Slide 3: UOB Overview
UOB Overview Founding Key Statistics for 9M15 Founded in August 1935 by a group of Chinese businessmen ■ Total assets : SGD323.4b (USD227.2b1) and Datuk Wee Kheng Chiang, grandfather of the present ■ Shareholder’s equity : SGD30.2b (USD21.2b1) UOB Group CEO, Mr. Wee Ee Cheong ■ Gross loans : SGD203.
Slide 4: A Leading Singapore Bank With Established Franchise In Core Market Segments
A Leading Singapore Bank With Established Franchise In Core Market Segments Group Retail Group Wholesale Banking Global Markets and Investment Management Best Retail Bank in Singapore1 Best SME Banking1 Strong player in Singapore dollar treasury instruments Strong player in credit cards and
Slide 5: 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. Achieved record NPAT of SGD3,249 million in 2014 Stability of management team ensures consistent execution of strategies Disciplined management styl
Slide 6: Expanding Regional Banking Franchise
Expanding Regional Banking Franchise Extensive Regional Footprint with 500+ Offices Profit before Tax and Intangibles by Region (SGD m) MYANMAR 2 offices 324 21 252 40% of GREATER CHINA 32% of 305 Group PBT 222 272 99 THAILAND 26 offices1 Group PBT 184 178 159 156 offices 118 156 146 276 105 180 VIE
Slide 7: Agenda
Agenda 1 Overview of UOB Group 2 Macroeconomic Outlook 3 Strong UOB Fundamentals 4 Our Growth Drivers 5 Latest Financials 7
Slide 8: Central Banks' Recent Easing Moves Spurred by Low/Negative Inflation & Weak Growth
Central Banks’ Recent Easing Moves Spurred by Low/Negative Inflation & Weak Growth Recent Central Banks’ Policy Decisions on Rates in year-to-date 2015 Contractionary Expansionary Sources: Bloomberg and various news wires 1. QE: Quantitative easing 2. RRR: Reserve requirement ratio 8
Slide 9: Fed Expected to Hike Rates in Dec 2015, More Than 1 Year After Conclusion of QE Tapering
Fed Expected to Hike Rates in Dec 2015, More Than 1 Year After Conclusion of QE Tapering Negative Implications • Reversal of capital flows and unwinding of • Increased liquidity on Markets carry trades • Lower interest rates • Depreciation of Asian currencies → and borrowing costs unhedged foreign e
Slide 10: Singapore Interest Rates Lifted by Stronger US$; Further Upside When Fed Eventually Hikes Rates
Singapore Interest Rates Lifted by Stronger US$; Further Upside When Fed Eventually Hikes Rates UOB’s S$ Floating-rate Loans to Benefit from Uptrend in Singapore’s Short-term Interest Rates SIBOR / SOR (%) S$ per US$ 1.6 1.44 1.4 1.42 1.4 1.2 1.38 1.0 1.36 0.8 1.34 0.6 1.32 0.4 1.3 0.2 1.28 0.0 1.26
Slide 11: Southeast Asia – Resilient Key Markets
Southeast Asia – Resilient Key Markets The long-term fundamentals and prospects of key Southeast Asian markets have greatly improved since the 1997 Asian Financial Crisis. Compared with 1997, they have: ‒ Significantly higher levels of foreign reserves ‒ Healthier current account and balance of
Slide 12: Singapore Expected to Grow 2.0% in 2015, As External Headwinds Remain
Singapore Expected to Grow 2.0% in 2015, As External Headwinds Remain Singapore’s 3Q15 GDP grew 1.4% y/y, the slowest in External Sectors Slowed Considerably nearly three years, as the lacklustre manufacturing sector was weighed down by a slowdown in biomedical and transport engineering clusters.
Slide 13: ASEAN Banking Sector: Strong Fundamentals Remain Intact
ASEAN Banking Sector: Strong Fundamentals Remain Intact Key Banking Trends Robust Capital Positions There has been a resurgence in loan demand after the (Tier 1 CAR, in %) deleveraging of ASEAN banks during the Global Financial Crisis ASEAN banks have healthy capital and funding levels 15.3 16.5
Slide 14: Prospects for Asia Remain Optimistic Due to Growing Population and Consumer Affluence
Prospects for Asia Remain Optimistic Due to Growing Population and Consumer Affluence Growing Global Middle Class Spending by Global Middle Class APAC’s middle class: APAC’s middle class spending: 2009: 28% of global middle class 2009: 23% of global middle class 2030: 66% (US$ trillion 2030: 56% (Bi
Slide 15: Room For More Optimism As Intra-Regional Trade is Set to Thrive in ASEAN after AEC Kicks Off
Room For More Optimism As Intra-Regional Trade is Set to Thrive in ASEAN after AEC1 Kicks Off Association of Southeast Asian North American Free Trade European Union (EU) Nations (ASEAN) Agreement (NAFTA) US$0.7 US$2.2 US$3.4 US$8.2 US$2.2 US$4.8 Share of total trillion trillion trillion trillion tr
Slide 16: Basel III Implementation across Jurisdictions
Basel III Implementation across Jurisdictions Particulars BCBS Singapore Malaysia Thailand Indonesia Hong Kong China Minimum CET1 4.5% 6.5%1 4.5% 4.5% 4.5% 4.5% 5.0% Minimum Tier 1 6.0% 8.0%1 6.0% 6.0% 6.0% 6.0% 6.0% Minimum Total Capital 8.0% 10.0%1 8.0% 8.5% 8.0% 8.0% 8.0% Full Compliance Jan-15 J
Slide 17: Resolution Regime Overview
Resolution Regime Overview Resolution Regime in Asia Public Existing Resolution Factors influencing How Past resolution been Country Discussion Powers views on bail-in 1 handled Transfer powers; Role as an international financial centre; Crisis prevention tools; no Singapore Yes statutory bail-in pr
Slide 18: Agenda
Agenda 1 Overview of UOB Group 2 Macroeconomic Outlook 3 Strong UOB Fundamentals 4 Our Growth Drivers 5 Latest Financials 18
Slide 19: Strong UOB Fundamentals
Strong UOB Fundamentals Strong Management with Proven track record in steering the bank through various global events and crises Proven Track Stability of management team ensures consistent execution of strategies Record Delivered record NPAT of SGD3,249m in FY14, driven by broad-based growth
Slide 20: Diversified Loan Portfolio
Diversified Loan Portfolio Gross Customer Loans by Geography 1 Gross Customer Loans by Currency Singapore Others Others 56% IDR 12% SGD 10% Greater 2% 52% China THB 12% 5% Indonesia MYR 5% 11% Thailand 5% Malaysia USD 12% 18% Gross Customer Loans by Maturity Gross Customer Loans by Industry Housing
Slide 21: Competitive Against Peers
Competitive Against Peers Standalone Efficient Cost Competitive Well-Maintained Strength Management ROAA Liquidity Moody’s S&P Fitch Baseline credit Return on average Costs/income ratio Loan/deposit ratio assessment assets1 Aa1 AA– AA– UOB aa3 44.1% 1.04% 81.6% Aa1 AA– AA– OCBC aa3 41.9% 1.14% 83.5%
Slide 22: Strong Capitalisation and Low Gearing Ratio
Strong Capitalisation and Low Gearing Ratio Total CAR, Tier 1 CAR, Common Equity Tier 1 19.3 18.4 18.4 18.2 17.6 16.6 16.4 16.3 15.8 15.5 15.5 15.5 14.8 14.5 14.5 14.3 14.1 13.9 13.6 13.6 13.4 13.4 (Total CAR, 13.0 12.9 12.9 12.8 12.5 12.5 11.7 11.6 11.5 11.4 11.2 11.1 11.0 Tier 1 CAR, 9.7 Common Eq
Slide 23: Strong Investment Grade Credit Ratings
Strong Investment Grade Credit Ratings Ratings Aa1/Stable/P-1 AA– /Stable/A-1+ AA– /Stable/F1+ ‘…Strong and valuable business franchise’ ‘Prudent management team… expect the bank to ‘Ratings reflect its strong domestic franchise, ‘Long experience in serving continue its emphasis on funding a
Slide 24: Robust Risk Management Framework
Robust Risk Management Framework Operate under strict regulatory regime; prudential standards in line with global best practices Strong risk culture; do not believe in achieving short-term gains at the expense of long-term interests Robust Focused on businesses which we understand and are well
Slide 25: Managing Risks for Stable Growth
Managing Risks for Stable Growth Prudent approach has been key to Group Risk Appetite Statement (GRAS) delivering sustainable returns over the years Manage Institutionalised framework through concentration GRAS risk – Outlines risk and return objectives to guide strategic decision-making Maintai
Slide 26: Resilient Asset Quality; High Allowances Coverage
Resilient Asset Quality; High Allowances Coverage Stable NPL Ratio Consistently High Allowances Coverage 3,500 2.0% 6,000 146.8% 145.9% 147.0% 144.1% 142.7% 200% 1.2% 1.2% 1.2% 1.2% 1.3% 3,000 100% 1.0% 5,000 1.4% 1.4% 1.4% 1.4% 1.4% 2,500 0% 536 605 648 635 4,000 548 0.0% -100% 2,000 197 187 204 14
Slide 27: Focusing on Preserving Balance Sheet Strength
Focusing on Preserving Balance Sheet Strength Strengthening our Balance Sheet Portfolio resilient with stable asset quality and adequate Assets: Others 7% provisions Inner circle: 2008 Outer circle: 9M15 Investments – NPL ratio largely stable at 1.3% 4% – Strong NPL coverage of 142.7% Government 1
Slide 28: Agenda
Agenda 1 Overview of UOB Group 2 Macroeconomic Outlook 3 Strong UOB Fundamentals 4 Our Growth Drivers 5 Latest Financials 28
Slide 29: Our Growth Drivers
Our Growth Drivers Realise Full Provides us with ability to serve expanding regional needs of our customers Potential of our Improves operational efficiency, enhances risk management, seamless customer Integrated Platform experience and faster time to market Global macro environment remains un
Slide 30: Tapping on Increasing Connectivity
Tapping on Increasing Connectivity Physical Connectivity Digital Connectivity China ASEAN-China 2014 Total trade: USD380bn 10-yr CAGR: 13% OBOR1: UOB present in > 10 Myanmar of the OBOR Thailand countries AEC1: New growth catalyst Malaysia Singapore Indonesia Intra-ASEAN 2014 Total trade: US$463bn 1
Slide 31: Capitalising on Rising Intra-Regional Flows
Capitalising on Rising Intra-Regional Flows ■ Capture regional opportunities Growing Intra-Regional Wholesale Business arising from increased regional connectivity Intra-Regional Loan (S$) Breakdown by Origin Dec 2010 Jun 2015 ■ Continuing to invest in regional capabilities Greater Others Others Loa
Slide 32: Strong Performance in Cash Management
Strong Performance in Cash Management Trade Loans Deposits ■ Trade loans declined in line with China’s slowing -17% CAGR CAGR +44% economy +58% 37% +10% 37% 36% ■ Emphasis on liability 42% 33% 33% 41% 33% 30% management demonstrated 48% 63% 64% 63% by strong cash management 58% 70% 67% 67% 67% 52% 5
Slide 33: Capturing Rising Asian Consumer Affluence
Capturing Rising Asian Consumer Affluence Wealth management’s1 Growing Regional Wealth Management Profit Contribution FY2010 – June 2015 performance: CAGR — AUM up from S$48bn to +26% S$83bn 30% +16% — Customer base grew from 30% 27% 32% 100,000 to 198,000 Region 26% 30% 70% 70% — Widened regional
Slide 34: Why UOB?
Why UOB? Stable Proven track record in steering the bank through various global events and crises Management Stability of management team ensures consistent execution of strategies Entrenched local presence. Ground resources and integrated regional network Integrated allow us to better address
Slide 35: Agenda
Agenda 1 Overview of UOB Group 2 Macroeconomic Outlook 3 Strong UOB Fundamentals 4 Our Growth Drivers 5 Latest Financials 35
Slide 36: 9M15 Financial Overview
9M15 Financial Overview Net Profit After Tax1 (NPAT) Movement, 9M15 vs 9M14 (SGD m) 104 4 260 292 12 34 64 2,463 –1.7% 2,421 +7.7% +8.0% –0.4% +12.4% +2.6% –32.2% +14.6% 9M14 net Net interest Fee income Other non- Expenses Total Share of Tax and mon- 9M15 net profit after tax income interest allowan
Slide 37: 3Q15 Financial Overview
3Q15 Financial Overview Net Profit After Tax1 Movement, 3Q15 vs 2Q15 (SGD m) 27 8 12 15 22 20 117 762 858 +12.6% +1.8% +4.2% +47.0% +3.1% +5.0% –30.2% +8.8% 2Q15 net Net interest Fee income Other non- Expenses Total Share of Tax and mon- 3Q15 net profit after tax income interest allowances profit of
Slide 38: NII driven by Growth in Loans and Margins
NII driven by Growth in Loans and Margins Net Interest Income (NII) and Margin 10,000 2.41% 2.29% 2.12% 2,500 2.06% 2.08% 2.19% 2.26% 2.27% 2.06% 2.00% 2.00% 9,000 1.92% 1.87% 2,000 1.71% 1.69% 1.76% 1.77% 1.77% 8,000 1.72% 1.71% 1.00% 1.00% 7,000 0.97% 0.81% 0.71% 0.91% 0.82% 0.65% 0.50% 6,000 0.76
Slide 39: Steady Non-Interest Income Mix Underpins Diversity
Steady Non-Interest Income Mix Underpins Diversity Non-Interest Income (Non-NII) and Non-NII Ratio 5,000 50.0% 50.0% 39.7% 38.7% 38.9% 41.4% 40.8% 35.5% 1400 36.8% 38.6% 37.0% 4,500 40.0% 40.0% 4,000 25.8% 23.5% 30.0% 23.1% 23.2% 1200 24.1% 24.3% 23.2% 24.1% 23.3% 30.0% 3,500 20.0% 20.0% 1000 3,000
Slide 40: Broad-based Growth in Fee Income
Broad-based Growth in Fee Income Breakdown of Fee Income (SGD m) (SGD m) 2,000 1,749 475 485 1,800 1,731 500 465 450 453 22 59 14 114 20 1,600 1,508 16 16 273 70 64 268 400 64 66 1,318 120 69 1,400 28 30 113 29 95 111 32 28 256 1,200 249 107 490 300 146 111 136 1,000 116 504 129 100 800 446 200 389
Slide 41: Maintain Costs Discipline while Investing in Long-Term Capabilities
Maintain Costs Discipline while Investing in Long-Term Capabilities Operating Expenses and Expense / Income Ratio 5,000 50.0% 50.0% 1,200 45.5% 43.0% 43.1% 43.5% 43.6% 43.4% 4,500 42.3% 42.2% 45.0% 45.0% 40.6% 4,000 1,000 40.0% 40.0% 877 904 852 3,500 35.0% 800 805 35.0% 3,146 2,898 800 3,000 2,747
Slide 42: Total Loan Charge-off Rate Stable
Total Loan Charge-off Rate Stable Allowances on Loans 996 50bps 249 50bps 32bps 40bps 32bps 32bps 32bps 32bps 32bps 40bps 30bps 30bps 30bps 796 30bps 199 30bps 30bps 31bps 20bps 20bps 596 10bps 149 15bps 10bps 12bps 12bps 14bps 12bps 11bps 8bps 0bps 0bps 396 (10)bps 99 (10)bps (20)bps 160 (20)bps 45
Slide 43: Loan Growth was 1% QoQ in Constant Currency Terms
Loan Growth was 1% QoQ in Constant Currency Terms Sep-14 QoQ YoY Sep-15 Jun-15 +/(–) Sep-14 +/(–) Others Gross Loans * SGD b SGD b % SGD b % Greater 9% Singapore China 56% Singapore 114.3 115.0 –0.7 109.1 +4.7 12% Regional: 70.7 71.1 –0.6 71.4 –1.0 Indonesia 5% Malaysia 23.7 25.3 –6.6 26.1 –9.3 Thai
Slide 44: Stable Liquidity Position
Stable Liquidity Position Customer Loans and Deposits; Loan/Deposit Ratios (LDR); and Liquidity Coverage Ratios (LCR) All-currency LCR (%) 144% 142% 134% SGD LCR (%) 157% 166% 186% 100.0% 94.1% 93.0% 94.5% 91.9% SGD LDR (%) 88.4% 90.0% 80.0% 85.8% Group LDR (%) 83.8% 83.4% 82.3% 81.6% 70.0% 70.6% US
Slide 45: Robust Credit Quality; NPL Ratio Stable at 1.3%
Robust Credit Quality; NPL Ratio Stable at 1.3% NPL ratio 1.2% 1.2% 1.2% 1.2% 1.3% NPL* (SGD m) 2,289 2,358 2,442 2,504 2,551 2,500 351 377 Others 400 419 166 432 149 2,000 127 Greater China 124 372 118 335 313 298 Indonesia 275 1,500 289 238 292 259 267 Thailand 378 388 423 386 Malaysia 1,000 400 S
Slide 46: Exposure to Mainland China
Exposure to Mainland China1 Total: Bank exposure in China S$20.9b • 99% with <1 year tenor • Top 5 domestic banks accounted for c.70% of bank exposures Non-bank exposure in China Individuals, State-owned • Breakdown by customer type: ~10% companies, ~40% • Well-diversified by industry – with Bank, P
Slide 47: Strong Capital and Leverage Ratios
Strong Capital and Leverage Ratios 7.6% 7.6% 7.2% Leverage ratio 1 0.05 Total CAR 18.0% 17.0%1 Category 16.9% 2 Category 17.1% Mar-15 16.8% Jun-15 16.4% Sep-15 0% 16.0% 3.0% 2.8% 3.0% 2.8% 2.8% Tier 2 CAR 14.0% -20000% 12.0% -40000% 10.0% 8.0% 14.0% 13.9% 14.3% 14.0% 13.6% -60000% Tier 1 / CET1 CAR
Slide 48: Stable Dividend Payout
Stable Dividend Payout 5 5 10 50 50 20 40 35 20 20 20 2012 2013 2014 9M15 Net dividend per ordinary share (¢) Interim Final Special UOB 80th Anniversary Payout amount (SGD m) 1,102 1,182 1,202 881 Payout ratio (%) 39 39 37 36 48
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