United Overseas Bank Limited · SGX:U11

United Overseas Bank — Investor Presentation (June 2019)

56 slides from United Overseas Bank's investor presentation, June 2019

  1. Slide 1: UOB Group: Healthy Earnings Supported by Strong Balance Sheet

    UOB Group Healthy Earnings Supported by Strong Balance Sheet June 2019 Discla imer: The mater ial in th is pr ese ntat ion conta ins g enera l b ackgro und informat ion a bout Un it ed Overse as Ba nk L im ited (“UO B”) and it s act ivit ies as at the date of the presentat ion. The informat ion is g

  2. Slide 2: Agenda

    Agenda 1. Overview of UOB Group 2. Strong UOB Fundamentals 3. Resilience of the Singapore Housing Market Appendix: A. Latest Financials B. Macroeconomic Outlook C. Regulatory Developments D. Our Growth Drivers

  3. Slide 3: Overview of UOB Group

    Overview of UOB Group HtUOB

  4. Slide 4: UOB Overview

    UOB Overview Founding Key Statistics for 1Q19 Founded in August 1935 by a group of Chinese ■ Total assets : SGD400b (USD296b1) businessmen and Datuk Wee Kheng Chiang, ■ Shareholders’ equity : SGD39b (USD29b1) grandfather of the present UOB Group CEO, Mr. Wee Ee Cheong ■ Gross loans : SGD270b (USD199

  5. 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

  6. 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

  7. 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 VIETNAM 39% of THAILAND 1 office Group profit 507 155 offices before tax PHILIPPINES 443 469 77 1 office 367 MALAYSIA 301 282 419 48 of

  8. Slide 8: Strong Capital and Leverage Ratios

    Strong Capital and Leverage Ratios Reported Common Equity Tier 1 CAR, Tier 1 CAR and Total CAR 25.1 24.1 24.1 21.6 20.2 19.0 (Common Equity 18.1 17.3 17.3 17.0 17.0 16.8 16.6 16.6 16.5 16.4 15.8 15.8 15.2 15.1 15.0 14.9 14.8 14.3 14.2 Tier 1 CAR; 14.1 14.1 14.0 14.0 13.9 13.5 13.4 12.9 12.6 12.5 11.

  9. 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 44.6% 1.07% 86.6% Aa1 AA– AA– OCBC a1 43.4% 1.17

  10. Slide 10: 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

  11. Slide 11: Strong UOB Fundamentals

    tit UOB Strong UOB Fundamentals 11

  12. 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  Prudent income growth amid the subdued business environmen

  13. Slide 13: 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

  14. Slide 14: Diversified Loan Portfolio

    Diversified Loan Portfolio Gross Customer Loans by Geography 1 Gross Customer Loans by Currency Others Others Greater 10% SGD Singapore 17% China IDR 46% 52% 16% 2% THB 6% Indonesia 4% MYR Thailand 9% 7% Malaysia USD 11% 20% Gross Customer Loans by Maturity Gross Customer Loans by Industry Professio

  15. Slide 15: New NPA Formation Trending to More Normalised Level

    New NPA Formation Trending to More Normalised Level (SGD m) 1Q18 2Q18 3Q18 4Q18 1Q19 NPA at start of period 4,389 4,323 4,404 4,374 4,166 Group wholesale and small enterprise customers: New NPA 235 252 275 370 230 Upgrades, recoveries and (206) (88) (229) (257) (139) translations Write-offs (129) (1

  16. Slide 16: Stable Credit Costs

    Stable Credit Costs Allowances for Loans 2,000 600 150bp 150bp 1,800 500 100bp 100bp 1,600 61bp 1,400 45bp 32bp 50bp 400 50bp 16bp 18bp 22bp 19bp 1,200 12bp 13bp 32bp 28bp 20bp 1,000 19bp 15bp 0bp 300 11bp 15bp 13bp 0bp 11bp 800 200 (50)bp (50)bp 600 400 655 693 660 100 (100)bp (100)bp 200 390 113 1

  17. Slide 17: Strong Capital and Leverage Ratios

    Strong Capital and Leverage Ratios 8.2% 7.7% 7.4% 7.6% 7.6% Leverage ratio 1 5.0% Total CAR 2 18.8% 18.4% 17.4% 17.0% 17.0% 0% 19.0% Tier 2 CAR 2 17.0% 2.4% 2.4% -20000% 1.5% 2.3% 2.1% 2.1% Tier 1 CAR 2 15.0% 1.5% 1.0% 1.0% 1.0% -40000% 13.0% 11.0% -60000% CET1 CAR 2 14.9% 14.5% 14.1% 13.9% 13.9% 9.

  18. Slide 18: Disciplined Balance Sheet Management

    Disciplined Balance Sheet Management  Improved balance sheet efficiency Balance Sheet Efficiency a Key Priority – Strong RoRWA1 driven mainly by healthy profit growth RoRWA1 1.51% 1.63% 1.93% 1.88%  Healthy portfolio quality – NPL ratio stable at 1.5% FY16 FY17 FY18 1Q19 – 19bp credit cost on loan

  19. Slide 19: 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 

  20. Slide 20: Our Sustainability Milestones

    Our Sustainability Milestones Supporting Sustainable Development Notable Recognitions 1. FTSE4Good ASEAN 5 Index UOB was ranked second by market capitalisation at end- 2018 2. Bloomberg Gender-Equality Index Sinar Kamiri Sdn Bhd UOB was included in 2019 based on disclosure in 2018. (A subsidiary of

  21. Slide 21: Resilience of the Singapore Housing Market

    Resilience of the Singapore Housing Market 21

  22. Slide 22: 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 (1Q09 = 100) (%) HK, 346 7.7 MY, 222 EU, 6.6 4.2 US, 3.9 AU, 162 TH, 154 CH, 3.8 100 HK, 2.7 SG, 149 2.4 SG, 2.0 1Q09 1Q11 1Q13 1Q15 1Q17 1Q19 2008 2010 2012

  23. Slide 23: Prudent Policies for Sustainable Prices

    Prudent Policies for Sustainable Prices Residential Property Price Indices in Singapore (1Q09 = 100) 160 HDB Resale Price Index 140 Private Residential Price Index 120 2013: Introduction of TDSR 100 80 2011: Introduction of ABSD 60 1997: Asian Crisis 2008: Onset of Credit Crisis 40 2003: SARS 2001:

  24. Slide 24: Appendix A: Latest Financials

    Appendix A: Latest Financials 24

  25. Slide 25: FY18 Financial Overview

    FY18 Financial Overview Net Profit After Tax (NPAT) Movement, FY18 vs FY17 (SGD m) 692 94 232 265 335 4 2 +18% 4,008 3,390 +13% +5% –20% +7% –46% –4% –0% FY17 net Net interest Net fee and Other non- Operating Total Share of Tax and FY18 net profit after income commission interest expenses 1 allowanc

  26. Slide 26: 1Q19 Financial Overview

    1Q19 Financial Overview Net Profit After Tax (NPAT) Movement, 1Q19 vs 4Q18 (SGD m) 200 89 35 17 17 21 12 +15% 1,052 916 –1% +2% >100% +9% –27% >100% +9% 4Q18 net Net interest Net fee and Other non- Operating Total Share of Tax and 1Q19 net profit after income commission interest expenses allowances

  27. Slide 27: Net Interest Income Supported by Loan Margin and Volume, but Offset by Excess Liquidity

    Net Interest Income Supported by Loan Margin and Volume, but Offset by Excess Liquidity Net Interest Income and Net Interest Margin 2,400 3.00% 3.00% 9,500 2.26% 2.20% 2.14% 2.19% 2.18% 2.22% 2.18% 2.15% 2.16% 2,200 2.00% 2.00% 8,500 1.77% 1.71% 1.77% 1.82% 2,000 1.84% 1.83% 1.81% 1.80% 1.79% 1.00%

  28. Slide 28: Broad-based Increase in Loan Portfolio

    Broad-based Increase in Loan Portfolio QoQ YoY Mar-19 Dec-18 +/(–) Mar-18 +/(–) Gross Loans SGD b SGD b % SGD b % By Geography Singapore 139 137 +1 129 +8 Regional: 101 97 +4 89 +13 Malaysia 29 29 - 29 - Thailand 18 17 +6 16 +13 Indonesia 11 11 - 10 +10 Greater China 43 40 +8 34 +26 Others 29 27 +7

  29. Slide 29: Non-Interest Income Rebounded with Financial Market

    Non-Interest Income Rebounded with Financial Market Non-Interest Income and as a % of Total Income 50.0% 50.0% 5,300 36.9% 35.9% 35.4% 1400 31.8% 40.0% 34.1% 34.2% 34.0% 40.0% 4,800 31.3% 27.4% 30.0% 30.0% 4,300 1200 20.0% 20.0% 3,800 21.0% 21.3% 21.9% 21.6% 23.2% 21.3% 20.8% 21.1% 1000 19.9% 10.0%

  30. Slide 30: Broad-based Focus in Fee Income

    Broad-based Focus in Fee Income Breakdown of Fee Income (SGD m) (SGD m) 2,500 2,303 602 581 568 569 2,161 63 600 20 15 551 80 15 12 1,931 296 72 14 2,000 1,883 74 74 70 272 500 76 74 93 154 36 37 37 39 263 148 43 258 1,500 134 545 400 141 121 148 135 471 154 121 498 482 300 1,000 543 165 547 132 133

  31. Slide 31: Pacing Growth in Operating Expenses, with Maintaining a Stable CIR

    Pacing Growth in Operating Expenses, with Maintaining a Stable CIR Operating Expenses and Costs / Income Ratio 5,500 50.0% 50.0% 5,000 44.0% 43.7% 43.9% 1,400 44.2% 44.4% 44.6% 43.0% 45.0% 43.6% 43.4% 45.0% 4,500 4,003 1,200 40.0% 40.0% 4,000 3,739 1,073 1,022 1,011 3,425 35.0% 987 984 3,500 3,356 1

  32. Slide 32: IT Investments Towards “Changing the Bank”

    IT Investments Towards “Changing the Bank” Connectivity and Digital for Focus Centralisation and Standardisation Growth Cumulative 2009 to 2013 2014 to 2018 IT investments (cSGD0.6 b) (cSGD1.6 b) Total IT investments Global Market Platform: Customer flow income +9%1 Cash Management Platform: 36% 34%

  33. Slide 33: Exposure to China

    Exposure to China Bank exposure as of 31 March 2019 Non-bank exposure as of 31 March 2019 • Bank exposure accounted for 56% of total • Target customers include top-tier state- exposure to China owned enterprises, large local corporates • Top 5 domestic banks and 3 policy banks and foreign investment

  34. Slide 34: NPL Ratio at 1.5%

    NPL Ratio at 1.5% NPL ratio 1.7% 1.7% 1.6% 1.5% 1.5% NPLs (SGD m) 4,138 4,208 4,185 3,994 4,055 4,400 Others 300 290 290 223 3,900 139 230 150 138 107 120 Greater China 531 3,400 692 721 749 545 Indonesia 2,900 485 482 416 456 485 Thailand 2,400 558 571 603 623 629 1,900 Malaysia 2,085 2,138 1,400 1

  35. Slide 35: Adequate Reserve Coverage Ratios

    Adequate Reserve Coverage Ratios 250% Total Allowances / 188% 191% Unsecured NPLs200% (%) 178% 178% 177% 150% Total Allowances / NPLs (%) 100% 81% 80% 80% 77% 79% 50%/ Allowances for NPLs NPLs (%) 43% 42% 43% 38% 38% 0% 4,000 3,500 3,000 Allowances for performing loans 2,500 1,570 1,581 1,586 (SGDm)

  36. Slide 36: Stable Liquidity and Funding Position

    Stable Liquidity and Funding Position 111% 110% 110% Net stable funding115% ratio 107% 109% (%) 105% 94.2% 94.8% 93.5% SGD loan-deposit ratio 95% 91.6% 90.3% (LDR) (%) 85% 86.7% 88.2% 86.6% Group LDR (%) 85.7% 85.7% 75% USD LDR (%) 65% 69.5% 66.2% 64.5% 65.8% 63.5% 55% Mar-18 Jun-18 Sep-18 Dec-18 Ma

  37. Slide 37: Higher Dividend for 2018

    Higher Dividend for 2018 20 20 20 50 45 35 35 50 35 35 35 2015 2016 2017 2018 Net dividend per ordinary share (¢) Interim Final Special UOB 80th Anniversary Payout amount (SGD m) 1,444 1,135 1,661 2,000 Payout ratio (%) 45 37 49 50 Payout ratio (excluding 35 37 39 42 special/one-off dividends) (%) N

  38. Slide 38: Appendix B: Macroeconomic Outlook

    Appendix B: Macroeconomic Outlook 38

  39. Slide 39: Southeast Asia: Resilient Key Markets

    Southeast Asia: Resilient Key Markets Significantly Higher Foreign Reserves Healthy Current Account Balances (USD billion) (% of GDP) 288 15.3 18.3 206 75 121 101 8.1 30 24 26 2.3 Singapore Thailand Indonesia Malaysia –2.0 –1.5 –2.4 –5.5 1998 2018 (latest available) Singapore Malaysia Thailand Indon

  40. Slide 40: 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 %) 22.0 Thailand Singapore 97 146 Indonesia 94 Thailand Indone

  41. Slide 41: Trade Tensions Cloud China’s Outlook but Low Risk of Hard Landing

    Trade Tensions Cloud China’s Outlook but Low Risk of Hard Landing  Despite ongoing structural slowdown, the Chinese economy has its underlying momentum, supported by rebalancing reforms and steady jobs market.  Low central government debt underpins China’s fiscal capacity, which could help mitigat

  42. Slide 42: Global Trade Tension Negative for Asia but Some Silver Lining May Emerge

    Global Trade Tension Negative for Asia but Some Silver Lining May Emerge Exports growth slowed across Asian countries in Key recipients of foreign direct investments in 2018 Asia Year on year export growth in USD terms (%) Foreign direct investments* (USD billion) 15 24 Malaysia Vietnam 36 14 35 22

  43. Slide 43: Implication on Regional Policy Rates

    Implication on Regional Policy Rates 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19f 3Q19f 4Q19f US 10-Year Treasury 2.33 2.40 2.74 2.86 3.06 2.68 2.41 2.45 2.60 2.70 US Fed Funds 1.25 1.50 1.75 2.00 2.25 2.50 2.50 2.50 2.50 2.50 SG 3M SIBOR 1.12 1.50 1.45 1.52 1.64 1.89 1.94 2.00 2.05 2.10 SG 3M SOR 1.01

  44. Slide 44: 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) c$55b (SGD b) CAGR Markets where UOB has a presence c$14b +11% c$44b Singapore Thailand c$3b c$2b c$10b c$6b +4% Hong Wealth Kong c$6b c$4b Ot

  45. Slide 45: Appendix C: Regulatory Developments

    Appendix C: Regulatory Developments 45

  46. Slide 46: 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

  47. Slide 47: 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 Revised7 LCR1 Phased-in Full NSFR2 Start SACCR3 Start MCRMR4 Start TLAC5 Phased-in Full Basel IV6 Phased-in Full IFRS 9 St

  48. Slide 48: 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%

  49. Slide 49: Appendix D: Our Growth Drivers

    Appendix D: Our Growth Drivers 49

  50. Slide 50: 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

  51. Slide 51: Southeast Asia’s Immense Long-term Potential

    Southeast Asia’s Immense Long-term Potential Population GDP1 Trade2 FDI3 (Million persons) (USD trillion) (USD trillion) (USD billion) 749 6.6 4.5 328 643 567 2.6 2.8 115 1.6 1.4 84 2007 2017 2030 2007 2017 2030 2007 2017 2030 2007 2017 2030 • Third largest globally, • Fifth largest economic • Fourt

  52. Slide 52: Wholesale Banking: Tapping Intra-Regional Flows through Diversification

    Wholesale Banking: Tapping Intra- Regional Flows through Diversification Strong income & RoRWA1 growth… ... supported by diverse sources By geography By product By sector +11% +17% +15% +11% 3.9 2.2 2.4 3.5 1.9 2.1 1.7 1.8 FY17 FY18 FY17 FY18 FY17 FY18 FY17 FY18 GWB income (SGD b) Non-Singapore Non-

  53. Slide 53: Strategic Initiatives to Tap Intra-Regional Flows

    Strategic Initiatives to Tap Intra- Regional Flows 1 2 3 Strengthen Connectivity Sector Specialisation Products & Platforms Support and grow with Offer customised Building new our customers in the solutions capabilities region to our customers • Focused on tapping • Focused sector teams • New produc

  54. Slide 54: Retail Banking: Serving Rising Affluent via Our Extensive In-country Presence

    Retail Banking: Serving Rising Affluent via Our Extensive In-country Presence Gross Loans (Group Retail1): +4% YoY in FY18 Income3 (Group Retail1) +4% YoY in FY18 SGD b SGD b 104 108 3.8 4.0 3.5 98 FY16 FY17 FY18 FY16 FY17 FY18 High Affluent2 income: +10% YoY in FY18 Segment RoRWA4 +0.50%pt YoY in F

  55. Slide 55: Leveraging Digitalisation and Partnerships to Grow and Deepen Customer Franchise

    Leveraging Digitalisation and Partnerships to Grow and Deepen Customer Franchise 1 2 3 Digital Bank Omni-Channel Experience Ecosystem Partnerships Targeting Mobile-First Traditional and affluent Forging collaborations to and Mobile-Only customers with universal widen distribution reach Generation ba

  56. Slide 56: Thank You

    Thank You tt UOB RIGHT BY YOU

United Overseas Bank — Investor Presentation (June 2019) on 6ix