United Overseas Bank Limited · SGX:U11
United Overseas Bank — HSBC ASEAN Forum 2018
54 slides from United Overseas Bank's conference presentation, February 2018
Slide 1: UOB Group: Performance Backed by Healthy Growth Momentum and Strong Balance Sheet
UOB Group Performance Backed by Healthy Growth Momentum and Strong Balance Sheet February 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 informat ion g ive n in
Slide 2: Agenda
Agenda 1. Overview of UOB Group 2. Macroeconomic Outlook 3. Strong UOB Fundamentals 4. Our Growth Drivers 5. Latest Financials
Slide 3: Overview of UOB Group
Overview of UOB Group HtUOB
Slide 4: UOB Overview
UOB Overview Founding Key Statistics for FY17 Founded in August 1935 by a group of Chinese ■ Total assets : SGD359b (USD268b1) businessmen and Datuk Wee Kheng Chiang, ■ Shareholder’s equity : SGD37b (USD28b1) grandfather of the present UOB Group CEO, Mr. Wee Ee Cheong ■ Gross loans : SGD236b (USD177
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 41% of 2 offices 27 offices1 Group PBT VIETNAM 39% of 469 THAILAND 1 office Group PBT 155 offices 324 367 301 252 419 29 PHILIPPINES 305 366 300 1 office 272
Slide 8: Why UOB?
Why UOB? Proven track record in steering the bank through various global events and Stable crises Management Stability of management team ensures consistent execution of strategies Entrenched local presence. Ground resources and integrated regional Integrated Regional network allow us to bette
Slide 9: Macroeconomic Outlook
Macroeconomic Outlook {itt VOB
Slide 10: 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 11: Brexit Impact on Asian Markets via Trade and Investment Channels
Brexit Impact on Asian Markets via Trade and Investment Channels It is still a challenge to quantify Brexit effects with EU & UK Export Mix of Selected Partners (2016) certainty at this stage. The immediate impact on Asian economies is likely 19% to be limited and shallow, considering the low ex
Slide 12: Implication on Regional Policy Rates
Implication on Regional Policy Rates 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18f 2Q18f 3Q18f 4Q18f US 10-Year Treasury 1.59 2.44 2.39 2.30 2.33 2.40 2.55 2.65 2.70 2.90 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 1.50 1.70 1.70 1.85 SG 3M SOR 0.67
Slide 13: Southeast Asia: Resilient Key Markets
Southeast Asia: Resilient Key Markets Significantly Higher Foreign Reserves Healthier Current Account Balances (USD billion) (% of GDP) 280 19.6 203 15.2 130 104 10.1 75 30 24 26 2.4 Singapore Thailand Indonesia Malaysia –2.0 –1.8 –1.7 –5.9 1998 2017 (latest available) Singapore Malaysia Thailand In
Slide 14: Singapore GDP Growth Likely to Moderate in 2018
Singapore GDP Growth Likely to Moderate in 2018 4Q17 GDP grew 3.6% yoy (3Q17: +5.5%) and was MAS Expected To Start Normalising in Apr 18 still supported mainly by expansion in the electronics and precision engineering clusters. Positive spillover 130 Easing #1 Easing #2 Easing #3 No change in neut
Slide 15: Southeast Asia Banking Sector: Strong Fundamentals Remain Intact
Southeast Asia Banking Sector: Strong Fundamentals Remain Intact Key Banking Trends Higher NIM in Lightly Penetrated Markets (Net interest margin and private-sector credit / GDP, in %) Southeast Asian banks have healthy capital and funding levels 6.6 6.2 — Singapore banks have among the highest ca
Slide 16: 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 (4Q07 = 100) (%) HK, 299 6.9 EU, 7.3 MY, 214 5.0 US, 4.1 AU, 162 CH, 3.9 HK, 2.8 100 TH, 119 1.6 SG, 1.8 SG, 114 4Q07 4Q09 4Q11 4Q13 4Q15 4Q17 2007 2009 2011
Slide 17: 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 18: 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 19: 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 20: Strong UOB Fundamentals
tit UOB Strong UOB Fundamentals 20
Slide 21: 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 22: 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 23: 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 45.5% 0.98% 85.1% Aa1 AA– AA– OCBC a1 41.9% 1.14
Slide 24: Strong Capital and Leverage Ratios
Strong Capital and Leverage Ratios Reported Common Equity Tier 1 CAR, Tier 1 CAR, Total CAR 24.0 23.1 23.1 21.3 21.0 19.0 18.9 18.7 (Common Equity 17.4 17.4 17.4 17.2 16.8 16.3 16.2 15.9 15.2 15.1 15.1 15.1 14.9 14.8 14.7 14.6 14.6 14.3 Tier 1 CAR; 14.0 13.9 13.8 13.6 13.4 13.2 12.4 12.4 12.3 11.9 1
Slide 25: 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 26: Diversified Loan Portfolio
Diversified Loan Portfolio Gross Customer Loans by Geography 1 Gross Customer Loans by Currency Others Singapore Others Greater 10% IDR 14% 54% SGD China 2% 14% 49% THB 6% Indonesia 5% MYR 10% Thailand 6% Malaysia USD 11% 19% Gross Customer Loans by Maturity Gross Customer Loans by Industry Professi
Slide 27: 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, with a ‘Well-established market position, strong ‘Sound capital position, which compares large capacity to absorb unforeseen losses.’ funding profile, and prudent managemen
Slide 28: Sustainability Reporting a Multi-Year Journey, with Progress Recognised
Sustainability Reporting a Multi-Year Journey, with Progress Recognised 2017: 100 2017: 49 Best Inaugural Rank 11th (Average) Sustainability Report 2016: 93 2016: 44 (Mainboard), Rank 14th (Laggard) 2017 Note: 1. The Singapore Sustainability Reporting Awards is organised by the Singapore Institute o
Slide 29: Our Growth Drivers
itt UOB Our Growth Drivers 29
Slide 30: 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 31: 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$m 470 449 501 629 726 798 FY15 FY16 FY17 FY15 FY16 FY
Slide 32: Focus on Sectors with Highest Trade and Connectivity Flows
Focus on Sectors with Highest Trade and Connectivity Flows One of 1st sectors launched: Financial Institution segment showing good progress Strong Income Diversified Building Regional Growth Product Mix Connectivity CAGR1 +29% 48% 40% 57% 52% 60% FY15 FY16 FY17 roup G FIG2 2017 Income from W
Slide 33: Retail Banking: Growth Momentum Gaining Traction
Retail Banking: Growth Momentum Gaining Traction Gross Loans (Group Retail1): +7% CAGR2 Income (Group Retail1) +9% CAGR2 S$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 34: 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 35: Latest Financials
itt UOB Latest Financials 35
Slide 36: FY17 Financial Overview
FY17 Financial Overview Net Profit After Tax1 (NPAT) Movement, FY17 vs FY16 (SGD m) 231 22 331 537 133 104 136 3,096 +9% 3,390 +11% +12% +2% +9% +23% >100% +20% FY16 net Net interest Fee income Other non- Expenses Total Share of Tax and FY17 net profit after income interest allowances profit of non-
Slide 37: 4Q17 Financial Overview
4Q17 Financial Overview Net Profit After Tax1 (NPAT) Movement, 4Q17 vs 3Q17 (SGD m) 52 34 18 129 81 7 41 883 –3% 855 +4% +6% –6% +13% –36% –23% +22% 3Q17 net Net interest Fee income Other non- Expenses Total Share of Tax and 4Q17 net profit after income interest allowances profit of non- profit afte
Slide 38: 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% 8,500 2.06% 2.09% 2,000 2.00% 2.00% 7,500 1.71% 1.77% 1.71% 1.77% 1.69% 1.73% 1.75% 1.79% 1.81% 1,800 1.00% 1.00% 0.82% 0.82% 0.93% 6,500 0.77% 0.7
Slide 39: Broad-based Increase in Loan Portfolio
Broad-based Increase in Loan Portfolio QoQ YoY Dec-17 Sep-17 +/(–) Dec-16 +/(–) Gross Loans SGD b SGD b % SGD b % By Geography 1 Singapore 128 127 +0 126 +2 Regional: 85 84 +2 78 +9 Malaysia 27 26 +3 26 +5 Thailand 15 14 +4 13 +13 Indonesia 11 11 –5 12 –10 Greater China 32 32 +2 27 +19 Others 23 23
Slide 40: Steady Non-Interest Income Mix Underpins Diversity
Steady Non-Interest Income Mix Underpins Diversity Non-Interest Income (Non-NII) and Non-NII Ratio 50.0% 50.0% 5,300 38.9% 38.8% 38.1% 37.5% 38.6% 1400 37.1% 37.9% 37.1% 36.7% 40.0% 40.0% 4,800 30.0% 30.0% 4,300 1200 24.4% 20.0% 26.2% 25.3% 20.0% 23.5% 23.4% 23.9% 24.0% 23.7% 24.6% 3,800 1000 10.0%
Slide 41: 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) 2,161 585 80 600 1,931 551 18 2,000 1,883 531 517 272 508 18 1,749 74 93 25 72 500 23 21 68 59 263 148 258 68 66 41 66 35 273 134 1,500 121 39 36 471 400 37 113 133 122 498 482 134 102 114 490 300 1,0
Slide 42: 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 47.2% 47.8% 50.0% 45.9% 45.5% 45.6% 44.7% 45.1% 42.2% 45.0% 1,600 43.5% 45.0% 5,500 46.1% 44.0% 45.2% 43.0% 43.7% 43.2% 43.8% 40.0% 1,400 40.0% 40.6% 41.5% 4,500 4,027 3
Slide 43: 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 44: Exposure to Commodities
Exposure to Commodities Total exposure, including off-balance sheet items, stood at SGD26.2b as of 31 December 2017 Mainly to traders and downstream segments Proactive monitoring, limit management and collateral enhancement Total exposure1 Outstanding loans 8% 8% 8% 35.0 7% 7% 0.1 30.0 27.6 28
Slide 45: Accelerated NPL Recognition of Oil and Gas and Shipping Sectors
Accelerated NPL Recognition of Oil and Gas and Shipping Sectors (SGD m) 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 NPA at start of 3,066 3,106 3,164 3,632 3,480 3,543 3,587 3,919 period New NPA 344 802 780 387 424 537 799 1,167 Upgrades, recoveries and (235) (548) (201) (320) (293) (255) (369) (354) tr
Slide 46: General Allowance Released to Offset Residual Risks from Vulnerable Sectors
General Allowance Released to Offset Residual Risks from Vulnerable Sectors Allowances on Loans 3,000 1800 35bp from150bp 73bp from 200bp 57bp from existing NPLs existing NPLs 36bp from 25bp from 1600 existing NPLs 125bp 150bp 2,500 existing NPLs 100bp existing NPLs 61bp 1400 76bp 100bp 45bp 49bp 37
Slide 47: Higher NPLs Confined to A Few Sectors; Broader Portfolio Quality Intact
Higher NPLs Confined to A Few Sectors; Broader Portfolio Quality Intact Special mention loans 3,339 3,043 2.714 2,337 2,114 (SGD m) NPL ratio 1.5% 1.5% 1.5% 1.6% 1.8% NPLs1 (SGD m) 3,328 3,399 3,466 3,748 4,211 4,500 Others 4,000 303 132 272 3,500 694 Greater China 285 244 245 257 3,000 304 261 307
Slide 48: Strong NPL Reserve Coverage Ratios
Strong NPL Reserve Coverage Ratios 300% 262% Total Allowances / 244% 241% 236% 250% Unsecured NPL (%) 195% 200% Total Allowances / 118% 118% 150% 114% 108% Total NPL (%) 91% 100% Specific Allowances 50%/ Total NPL (%) 0% 37% 41% 38% 39% 44% 4,500 4,000 Specific Allowances 3,500 on Loans (SGD m) 1,21
Slide 49: Sufficient Allowance to Meet Accounting and Regulatory Standards in 2018
Sufficient Allowance to Meet Accounting and Regulatory Standards in 2018 General Allowance Expected Losses1 (SGD b) 2.6 0.6 2.0 2.0 3Q17 Reversal 4Q17 1 Jan 2018 (31 Dec 2017) 1. Expected credit losses for Stage 1 & 2 exposures under SFRS(I) 9. This amount also satisfies MAS 612’s minimum regulatory
Slide 50: Exposure to China
Exposure to China Bank exposure Non-bank exposure Bank exposure accounted for the Target customers include top-tier state-owned enterprises, majority (60%-70%) of total exposure large local corporates and foreign investment enterprises to China NPL ratio at around 0.6% Low counterparty risk,
Slide 51: Stable Liquidity Position
Stable Liquidity Position Customer Loans and Deposits; Loan/Deposit Ratios (LDR); and Liquidity Coverage Ratios (LCR) All-currency LCR (%) 162% 154% 157% 142% 135% SGD LCR (%) 275% 232% 203% 196% 170% 95.0% 89.7% 89.9% 91.9% 92.3% 87.8% SGD LDR (%) 85.0% 86.8% 86.7% 86.1% 85.8% 85.1% Group LDR (%) 7
Slide 52: Strong Capital and Leverage Ratios
Strong Capital and Leverage Ratios 7.4% 7.6% 7.8% 7.7% 8.0% Leverage ratio 1 5.0% Total CAR 2 16.2% 17.3% 17.8% 17.8% 18.7% 0% 19.0% 17.0% 2.5% -20000% 3.5% 3.0% 1.1% Tier 2 CAR 2 15.0% 3.5% 3.1% 0.5% 0.5% -40000% 13.0% 0.1% 0.6% Tier 1 CAR 2 11.0% -60000% CET1 CAR 2 13.8% 14.3% 15.1% 9.0% 13.0% 13.
Slide 53: 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 54: Thank You
Thank You tt UOB RIGHT BY YOU