United Overseas Bank Limited · SGX:U11
United Overseas Bank — H1 2003 Earnings Presentation
30 slides from United Overseas Bank's earnings presentation, Aug 1, 2003
Slide 1: Building a Premier Regional Bank: Analysts' Briefing First Half 2003 Results
Building a Premier Regional Bank Analysts’ Briefing First Half 2003 Results Address by Kuek Tong Au Executive Vice President Corporate Services 1 August 2003 Disclaimer : This material that follows is a presentation of general background information about the Bank’s activities current at the date of
Slide 2: Panel Members
Panel Members Mr Samuel Poon SEVP, Institutional & Individual Financial Services Mr Terence Ong SEVP, Global Treasury / Asset Management Mr Kuek Tong Au EVP, Corporate Services Ms Sim Puay Suang EVP, Personal Financial Services Mr David Loh EVP, Risk Management & Compliance
Slide 3: Agenda
Agenda 1H03 1H03 Operations Operations Review Review Financial Financial Highlights Highlights Moving Moving Forward Forward
Slide 4: Creditable 1H03 Operating Profit despite Challenging Environment
Creditable 1H03 Operating Profit despite Challenging Environment Operating profit (before goodwill amortisation & provisions) grew 9.7% on the back of : Uncertainties from Iraq war and SARS outbreak Low interest rate environment Continued downward pressure on loan margin in light of intense co
Slide 5: Seizing Pockets of Opportunities
Seizing Pockets of Opportunities Tap current favorable interest rate environment to lock in low- cost funds • Issued US$1 billion 4.50% Subordinated Notes due 2013 Making inroads in China • Set up fund management company to pave way for growth in fund management franchise Enhance CDO capabilit
Slide 6: Regional Updates
Regional Updates UOB Malaysia remains a key contributor, accounting for about 13% of Group profits UOB Radanasin benefited from pick-up in economic activities in Thailand and has turned in profits of THB 112 million (S$4.7 million) UOB Indonesia continues to be profitable and is in good positi
Slide 7: Quarter-on-Quarter Profits Declined
Quarter-on-Quarter Profits Declined 2Q03 1Q03 Inc / 2Q02 Inc / (Dec) (Dec) $m $m $m % % Net Interest Incom e 532 535 (0.6) 544 (2.2) Non-Interest Incom e 259 249 4.0 201 29.2 Total Incom e 791 785 0.8 745 6.2 Less: O perating Expenses 271 266 2.1 250 8.6 O perating Profit before G oodw ill and Provi
Slide 8: Performance at a Glance
Performance at a Glance Increase / (Decrease) 1H03 1H02 Amount % Operating Profit before Goodwill and Provisions - $m 1,039 948 91 9.7 Net Profit After Tax (NPAT) - $m 521 591 (70) (11.9) NPAT (excluding goodwill) - $m 623 684 (61) (9.0) Net Customer Loans - $m 59,760 59,289 471 0.8 Non-Performing L
Slide 9: Profits Declined amidst Difficult Economic Conditions
Profits Declined amidst Difficult Economic Conditions 1H03 1H02 Inc / (Dec) $m $m $m % Net Interest Incom e 1,067 1,089 (22) (2.0) Non-Interest Incom e 509 386 123 31.9 Total Incom e 1,576 1,475 101 6.9 Less: O perating Expenses 537 527 10 1.8 Operating Profit before G oodw ill and Provisions 1,039
Slide 10: Lower Net Interest Income from Continued Low Interest Rate Environment and Flat Yield Curve
Lower Net Interest Income from Continued Low Interest Rate Environment and Flat Yield Curve Net Net Interest Interest Income Income Net Net Interest Interest Margin Margin ($m) (%) 750 2.75 1,089 1,067 600 2.50 2.30 2.31 2.26 545 544 535 532 2.22 450 2.25 2.06 300 2.00 150 1.75 0 1.50 1H02 1H03 2000
Slide 11: Robust Growth in Non-Interest Income
Robust Growth in Non-Interest Income Non-Interest Income Non-Interest Income (Non -NII) (Non-NII) ($m) .9 % 600 31 509 500 56 386 57 400 259 35 249 58 127 300 201 45 20 36 200 23 22 35 33 77 50 21 247 269 100 124 131 138 0 2Q02 1Q03 2Q03 1H02 1H03 Non-NII /Total Income : 26.9% 31.8% 32.8% 26.2% 32.3
Slide 12: Stronger Fee and Commission Income
Stronger Fee and Commission Income 1H03 1H02 Increase / (Decrease) $m $m $m % Credit card 40 43 (3) (7.1) Fund management 32 39 (7) (18.6) Futures broking & stockbroking 17 31 (14) (43.8) Investment-related 28 12 16 141.4 141.4 Loan-related 62 40 22 55.1 55.1 Service charges 24 20 4 19.3 Trade-relat
Slide 13: Effective Cost Management
Effective Cost Management 1H03 1H02 Inc / (Dec) 2Q03 1Q03 Inc / (Dec) $m $m % $m $m % Staff Costs 262 271 (3.3) 130 132 (1.0) 275 256 7.3 141 134 5.2 Other Operating Expenses Total 537 527 1.8 271 266 2.1 Expense-to-Income Expense-to-Income Ratio Ratio (%) 39.5 39.3 40.0 38.0 35.7 36.0 34.9 34.1 34.
Slide 14: Higher Provision Charges Necessary
Higher Provision Charges Necessary Provisions Provisions Charged Charged to to Income Income Statement Statement 1H03 1H02 Inc / (Dec) 2Q03 1Q03 Inc / (Dec) $m $m % $m $m % Specific provisions for loans 245 191 28.4 163 82 98.0 Specific provisions for investments and other assets 20 (34) nm 12 8 54.
Slide 15: Respectable Net Profit in this Challenging Times
Respectable Net Profit in this Challenging Times ($m) Net Net Profit Profit After After Tax Tax 1H02 Net Profit 591 Positive Factors ($m) Non-interest income 123 400 591 Exceptional item 18 521 316 Tax and MI 1 281 Negative Factors 300 275 240 Provision charges (108) Pre-tax associates’ profit (64)
Slide 16: Improved Loans Demand and Diversified Portfolio
Improved Loans Demand and Diversified Portfolio Net Net Customer Customer Loans Loans Gross Gross Loans Loans by by Industrial Industrial Classification Classification ($b) Jun-03 80.0 60.9 59.3 58.9 59.2 59.8 Transport, storage 60.0 and communication Building and Others construction 9.9% 3.2% 12.9%
Slide 17: Slight Decline in Deposits
Slight Decline in Deposits Customer Customer Deposits Deposits Total Total Deposits Deposits by by Type Type ($b) Jun-03 100.0 74.5 Customer fixed 80.0 68.1 67.9 65.8 66.8 Bankers’ deposits deposits 21.9% 53.3% 60.0 40.0 20.0 24.8% Customer savings and other deposits 0.0 Dec-01 Jun-02 Dec-02 Mar-03
Slide 18: Better Utilisation of Surplus Funds
Better Utilisation of Surplus Funds Loans Loans // Deposits Deposits Ratio Ratio (%) 100.0 95.0 89.9 89.4 90.0 87.1 86.7 85.0 81.8 80.0 75.0 70.0 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03
Slide 19: Improved Non-Performing Loans (NPLs) Ratio
Improved Non-Performing Loans (NPLs) Ratio Total NPLs ($m) 5,968 5,971 5,679 5,669 5,393 ($m) (%) 6,000 12 3,851 4,039 3,619 3,615 3,386 10 4,000 9.3% 9.5% 9.0% 8.9% 8.4% 8 6 2,000 497 447 445 384 425 4 1,620 1,548 1,613 1,609 1,582 0 2 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 Loss Doubtful Substandard NP
Slide 20: Reduction in NPLs across Regions
Reduction in NPLs across Regions Total NPLs ($m) 5,968 5,971 5,679 5,669 5,393 ($m) 6,000 187 172 104 103 362 227 97 182 173 181 1,600 1,555 1,458 1,510 1,431 4,000 2,000 3,819 4,017 3,935 3,883 3,684 0 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 Singapore 5 Regional Countries Greater China Others
Slide 21: Reduction in NPLs across Major Sectors
Reduction in NPLs across Major Sectors NPLs NPLs By By Industrial Industrial Classification Classification Inc / (Dec) Jun-03/ Jun-03/ Jun-03 Dec-02 Jun-02 Dec-02 Jun-02 $m $m $m $m $m Transport, storage and communication 123 124 99 (1) 24 Building and construction 770 843 1,108 (73) (338) (338) Man
Slide 22: Improved NPLs Ratio for Major Sectors
Improved NPLs Ratio for Major Sectors NPLs NPLs Ratio Ratio By By Industrial Industrial Classification Classification Inc / (Dec) Jun-03/ Jun-03/ Jun-03 Dec-02 Jun-02 Dec-02 Jun-02 % % % % pts % pts Transport, storage and communication 6.1 6.0 4.9 0.1 1.2 Building and construction 9.5 9.2 11.5 0.3 (
Slide 23: Cumulative Provisions Maintained Despite Drop in NPLs
Cumulative Provisions Maintained Despite Drop in NPLs Total Provisions ($m) 3,334 3,403 3,504 3,531 3,496 ($m) (%) 3,500 3.0 1,425 1,427 1,427 1,435 1,428 3,000 2,500 2.3% 2.4% 2.4% 2.4% 2.3% 2.0 2,000 1,500 2,104 1.0 1,000 2,079 2,069 1,975 1,899 500 0 0.0 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 Specifi
Slide 24: Increase in Provision Coverage
Increase in Provision Coverage Cumulative Cumulative Provisions Provisions // Cumulative Cumulative Provisions Provisions // Total Total NPLs NPLs Ratio Ratio Unsecured Unsecured NPLs NPLs Ratio Ratio (%) (%) 66 64.8 150 64 62.3 138.3 61.7 140 136.6 137.3 62 60 130 134.5 132.2 58 57.0 55.9 120 56 54
Slide 25: Strong Capital Position
Strong Capital Position Capital Capital Adequacy Adequacy Ratio Ratio (BIS) (BIS) ($b) (%) 90.0 25 18.5 17.2 20 17.8 15.3 15.4 60.0 15 15.4 12.2 12.4 12.3 11.8 11.8 10 30.0 Risk Weighted Assets 5 0.0 0 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 Risk Weighted Assets Tier 1 CAR Total CAR Total CAR including U
Slide 26: Higher Dividend Payout to Reward Shareholders
Higher Dividend Payout to Reward Shareholders (%) 60 50 18.8% 40 30 25% 25% 25% 25% 20 12% 10 20% 15% 15% 15% 8% 0 1999 2000 2001 2002 1H03 Dividend Amount $416m $316m $426m $720m $245m Dividend Payout Ratio 54.7% 34.6% 46.0% 67.7% 47.1% Interim Final Dividend in Specie Special
Slide 27: In Summary …
In Summary … Inc / Inc / 1H03 1H02 2Q03 1Q03 (Dec) (Dec) Net Profit After Tax $521m $591m (11.9)% $240m $281m (14.5)% ROE (excluding goodwill) 9.7% 10.6% (0.9)% pt 9.0% 10.4% (1.4)% pt Expense to Income Ratio 34.1% 35.7% (1.6)% pt 34.3% 33.8% 0.5% pt NPL/Gross Customer Loans 8.4% 9.5% (1.1)% pt 8.4%
Slide 28: Moving Forward
Moving Forward Receding event risk, both SARS and Iraq war Signs of pick-up in the operating environment Region will be key to our future, remain confident of region’s fundamental prospects and long-term growth potential
Slide 29: Focused Business Strategy
Focused Business Strategy Continue to strengthen market positions in Consumer and SME markets Strengthen Reinforce fee-based activities Domestic Position Prudent cost management Continue to grow existing operations organically Focused Regional Seize opportunities as and when they arise Exp
Slide 30: To be a premier bank in the Asia-Pacific region
The Vision To be a premier bank in the Asia-Pacific region Committed to providing quality products and excellent customer service