United Overseas Bank Limited · SGX:U11

United Overseas Bank — Investor Presentation (May 2016)

52 slides from United Overseas Bank's investor presentation, May 2016

  1. Slide 1: UOB Group: Balance Sheet Strength Intact amidst Volatile Markets

    UOB Group Balance Sheet Strength Intact amidst Volatile Markets May 2016 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 purport to be

  2. Slide 2: Agenda

    Agenda 1 Overview of UOB Group 2 Macroeconomic Outlook 3 Strong UOB Fundamentals 4 Our Growth Drivers 5 Latest Financials 2

  3. Slide 3: Overview of UOB Group

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  4. Slide 4: UOB Overview

    UOB Overview Founding Key Statistics for 1Q16 Founded in August 1935 by a group of Chinese ■ Total assets : SGD329.7b (USD244.3b1) businessmen and Datuk Wee Kheng Chiang, ■ Shareholder’s equity : SGD30.6b (USD22.8b1) grandfather of the present UOB Group CEO, Mr. Wee ■ Gross loans : SGD209.4b (USD155

  5. Slide 5: A Leading Singapore Bank with Established Franchise in Core Market Segments

    A Leading Singapore Bank with Established Franchise in Core Market Segments Global Markets and Group Retail Group Wholesale Banking Investment Management  Best Retail Bank in Singapore1  Best SME Banking1  Strong player in Singapore dollar treasury instruments  Strong player in credit cards and

  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 and Intangibles by Region (SGD m) MYANMAR GREATER CHINA 2 offices 28 offices1 VIETNAM THAILAND 1 office 33% of 324 157 offices Group PBT 367 PHILIPPINES 21 252 305 366 1 office 222 272 99 61 MALAYS

  8. Slide 8: Macroeconomic Outlook

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  9. Slide 9: Weak Growth and Deflation Drove Monetary Easing Even As US Fed Began to Normalise Rates

    Weak Growth and Deflation Drove Monetary Easing Even As US Fed Began to Normalise Rates Selected Central Banks’ Policy Decisions on Rates over 2015 and year-to-date 2016 Contractionary Expansionary Sources: Bloomberg, UOB Global Economics & Market Research 1. QE: Quantitative easing 2. NEER: Nominal

  10. Slide 10: After Finally Hiking Rates in Dec 2015, The Fed Has Held Back Further Hikes

    After Finally Hiking Rates in Dec 2015, The Fed Has Held Back Further Hikes So Far In 2016 Effects Of Low Interest Negative Implications on Impact Of Reversing QE Rates & QE Markets & Low Rates • Increased liquidity • Asset bubbles with influx of hot • Reversal of capital flows and • Lower interest

  11. Slide 11: Implication on Regional Policy Rates

    Implication on Regional Policy Rates 2Q15 3Q15 4Q15 1Q16 2Q16f 3Q16f 4Q16f US Fed Funds 0.25 0.25 0.50 0.50 0.75 0.75 1.00 SG 3M SOR 0.77 1.24 1.70 0.81 1.30 1.40 1.70 MY Overnight Policy Rate 3.25 3.25 3.25 3.25 3.25 3.25 3.25 TH Benchmark Policy Rate 1.50 1.50 1.50 1.50 1.50 1.50 1.50 ID Benchmark

  12. Slide 12: Southeast Asia: Resilient Key Markets

    Southeast Asia: Resilient Key Markets Long-term fundamentals and prospects of key Southeast Asia 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 payment positions

  13. Slide 13: We Still Expect Singapore GDP Growth Slightly Stronger at 2.7% in 2016

    We Still Expect Singapore GDP Growth Slightly Stronger at 2.7% in 2016  Singapore’s GDP grew at a weak 1.8% y/y in 1Q16, as the manufacturing sector contracted for the 6th Neutral Stance Adopted In April 2016 quarter and the services sector expanded at a slow 1.9% y/y pace. In response, the MAS ado

  14. Slide 14: ASEAN Banking Sector: Strong Fundamentals Remain Intact

    ASEAN Banking Sector: Strong Fundamentals Remain Intact Key Banking Trends Higher NIM in Lightly Penetrated Markets  There has been a resurgence in loan demand after the (Net interest margin and private-sector credit / GDP, in %) deleveraging of ASEAN banks during the Global 6.9 Financial Crisis 6.

  15. Slide 15: Prospects for Asia Optimistic with Growing Population and Consumer Affluence

    Prospects for Asia Optimistic with Growing Population and Consumer Affluence Growing Global Middle Class Spending by Global Middle Class APAC’s middle class: (USD trillion APAC’s middle class spending: (Billion) of 2005 2009: 28% of global middle class 2009: 23% of global middle class 2030: 66% PPP

  16. Slide 16: Room for More Optimism on Intra-Regional Trade in the ASEAN region

    Room for More Optimism on Intra-Regional Trade in the ASEAN region Association of Southeast North American Free Trade European Union (EU) Asian Nations (ASEAN) Agreement (NAFTA) USD0.7 USD2.2 USD3.4 USD8.2 USD2.2 USD4.8 trillion trillion trillion trillion trillion trillion Share of total goods trade

  17. Slide 17: 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

  18. Slide 18: Resolution Regime Overview

    Resolution Regime Overview Resolution Regime in Asia Public Existing resolution Factors influencing How past resolution Country discussion powers views on bail-in 1 been handled Statutory bail-in proposed Role as an global financial hub; Crisis prevention tools; Singapore Yes to apply to only streng

  19. Slide 19: Strong UOB Fundamentals

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  20. Slide 20: 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  Steady flow of net interest income, representing 65% of to

  21. Slide 21: Diversified Loan Portfolio

    Diversified Loan Portfolio Gross Customer Loans by Geography 1 Gross Customer Loans by Currency Singapore Others Others 56% IDR 12% 10% SGD Greater 2% 53% China THB 12% 5% Indonesia MYR 5% 11% Thailand 5% Malaysia USD 12% 17% Gross Customer Loans by Maturity Gross Customer Loans by Industry Housing

  22. Slide 22: 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 aa3 45.4% 0.95% 80.7% Aa1 AA– AA– OCBC aa3 44.8% 1.

  23. Slide 23: Strong Capitalisation and Low Gearing Ratio

    Strong Capitalisation and Low Gearing Ratio Reported Common Equity Tier 1 CAR, Tier 1 CAR, Total CAR 20.4 18.7 18.7 19.5 17.7 17.7 17.3 16.8 (Common Equity 16.0 16.0 15.7 15.7 15.7 15.2 15.1 14.6 14.5 14.3 14.2 14.1 14.1 14.0 13.8 13.7 13.5 12.8 12.8 12.8 Tier 1 CAR; 12.6 12.4 12.3 12.2 11.9 11.7 11

  24. Slide 24: Strong Investment Grade Credit Ratings

    Strong Investment Grade Credit Ratings Ratings Aa1/Stable/P-1 AA– /Stable/A-1+ AA– /Stable/F1+  ‘Very strong buffers in terms of capital, loan  ‘Prudent management team… expect the bank to  ‘Ratings reflect its strong domestic franchise, loss provisions and pre-provision income’ continue its emph

  25. Slide 25: Robust Risk Management Framework

    Robust Risk Management Framework  Operate under strict regulatory regime; prudential rules in line with global best practices  Strong risk culture; focus beyond long-term sustainability, beyond gains in short-term Robust  Focused on businesses which we understand and are well-equipped to manage R

  26. Slide 26: 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

  27. Slide 27: Resilient Asset Quality; High Allowances Coverage

    Resilient Asset Quality; High Allowances Coverage Stable NPL Ratio Consistently High Allowances Coverage 4,000 2.0% 1.4% 1.4% 6,000 147.0% 144.1% 142.7% 130.5% 133.2% 200% 1.2% 1.2% 1.3% 3,500 100% 1.0% 1.4% 5,000 1.4% 1.4% 1.4% 1.5% 3,000 0% 651 586 2,500 4,000 605 648 635 160 0.0% -100% 217 712 77

  28. Slide 28: Disciplined Balance Sheet Management

    Disciplined Balance Sheet Management  Slight uptick in NPLs buffered by Assets: Others diversified portfolio with Inner circle: 2008 8% Outer circle: 1Q16 Investments significant allowances 3% – NPL ratio largely stable at 1.4% Government 11% – High general allowances-to-loans 6% 9% 55% Customer ra

  29. Slide 29: Our Growth Drivers

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  30. 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

  31. Slide 31: Wholesale Banking: Forging Ahead

    Wholesale Banking: Forging Ahead  Stronger wholesale banking income Wholesale Banking Business – Driven by stronger liability Gross Loans ($bn) Total Income ($m) management and cross-selling efforts +13% +6% 4000 +10% 4.00% +8% YoY +10% YoY 3500 YoY YoY  Investing and developing strong 3000 3.00%

  32. Slide 32: Cash Management Maintains Strong Momentum

    Cash Management Maintains Strong Momentum  Growth in transaction banking Trade Loans Deposits income in 2015, despite lower CAGR trade loans CAGR +14% +21% 35%  Strong cash management 37% 30% 33% 39% 33% performance 41% 65% – Invested in product solutions 48% 63% 61% 67% 70% 67% 59% and innovation

  33. Slide 33: Retail Banking: Healthy Contributions

    Retail Banking: Healthy Contributions  Healthy retail banking1 income despite Group Retail Business challenging environment Gross Loans ($bn) Total Income ($m) +11% +3% +9%  Growth of housing loan portfolio easing 4000 3.00% +9% YoY +8% YoY 3500 YoY 2.50% YoY – Overall asset quality expected to re

  34. Slide 34: Digitalisation - Enriched Customer Experience

    Digitalisation - Enriched Customer Experience 1 Seamless connectivity 2 Analytics-driven 3 Innovation within & across channels for customer insights collaboration with superior customer Increase & improve Eco-system partners & experience & access customer engagement FinTechs to deliver customer-cent

  35. Slide 35: 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

  36. Slide 36: Latest Financials

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  37. Slide 37: FY15 Financial Overview

    FY15 Financial Overview Net Profit After Tax1 (NPAT) Movement, FY15 vs FY14 (SGD m) 368 134 87 451 37 59 84 –1.2% 3,249 3,209 +8.1% +7.7% +7.6% +14.3% +5.7% –40.0% +14.6% FY14 net Net interest Fee income Other non- Expenses Total Share of Tax and FY15 net profit after income interest allowances prof

  38. Slide 38: 1Q16 Financial Overview

    1Q16 Financial Overview Net Profit After Tax1 (NPAT) Movement, 1Q16 vs 4Q15 (SGD m) 2 47 73 48 5 61 70 788 –2.8% 766 –0.2% –9.8% –19.0% –7.2% –38.4% >100.0% +3.7% 4Q15 net Net interest Fee income Other non- Expenses Total Share of Tax and 1Q16 net profit after income interest allowances profit of mo

  39. Slide 39: Net Interest Income Driven by Growth in Loans and Margins

    Net Interest Income Driven by Growth in Loans and Margins Net Interest Income (NII) and Margin 9,000 2,500 3.00% 2.34% 2.36% 3.00% 2.29% 2.12% 2.26% 2.19% 2.26% 2.27% 2.06% 2,300 8,000 2.00% 2.00% 1.87% 2,100 1.79% 1.78% 1.72% 1.71% 1.77% 1.76% 1.77% 1.77% 1.00% 1.00% 7,000 1,900 0.91% 0.76% 0.82% 0

  40. 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% 39.7% 38.7% 38.9% 38.8% 38.6% 40.8% 38.6% 5,000 40.0%1400 37.0% 35.3% 40.0% 25.8% 23.5% 23.4% 30.0%1200 23.2% 23.2% 24.2% 23.3% 23.1% 22.0% 30.0% 4,000 20.0% 20.0% 1000 3,122 10.0% 850 10.0

  41. Slide 41: Broad-based Focus in Fee Income

    Broad-based Focus in Fee Income Breakdown of Fee Income (SGD m) (SGD m) 2,000 1,883 1,749 74 485 480 1,800 1,731 500 465 453 22 59 258 16 433 114 20 1,600 1,508 16 273 64 64 268 121 66 27 120 400 64 1,400 30 35 113 29 63 111 28 256 1,200 498 31 107 490 300 111 136 135 1,000 116 504 110 800 446 416 2

  42. Slide 42: 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% 46.3% 50.0% 44.7% 45.5% 45.4% 43.1% 1,400 43.6% 43.4% 4,500 42.3% 42.2% 45.0% 45.0% 4,000 40.0%1,200 40.0% 3,597 3,500 35.0% 964 35.0% 3,146 1,000 877 904 894 3,000 2,898 30.

  43. Slide 43: Stable Total Credit Costs

    Stable Total Credit Costs Allowances on Loans 996 50bps249 50bps 32bps 32bps 40bps 32bps 32bps 32bps 32bps 32bps 40bps 30bps 30bps 796 30bps199 30bps 30bps 31bps 20bps 25bps 20bps 22bps 19bps 10bps149 10bps 596 12bps 12bps 11bps 8bps 0bps 0bps 396 (10)bps99 (10)bps (20)bps 160 (20)bps 133 454 115 19

  44. Slide 44: Loan Growth was 1.2% QoQ in Constant Currency Terms

    Loan Growth was 1.2% QoQ in Constant Currency Terms QoQ YoY Gross loans breakdown: Mar-16 Dec-15 +/(–) Mar-15 +/(–) Inner circle: Dec-15 Gross Loans 1 SGD b SGD b % SGD b % Outer circle: Mar-16 Singapore 117.8 116.1 +1.5 114.5 +2.9 Others Regional: 72.4 72.8 –0.7 72.5 –0.3 10% Singapore Malaysia 25.

  45. Slide 45: Stable Liquidity Position

    Stable Liquidity Position Customer Loans and Deposits; Loan/Deposit Ratios (LDR); and Liquidity Coverage Ratios (LCR) All-currency LCR (%) 140% 152% 138% 142% 139% SGD LCR (%) 150% 165% 179% 217% 169% 100.0% 94.5% 91.9% 91.7% SGD LDR (%) 88.4% 88.1% 90.0% 80.0% 84.7% Group LDR (%) 83.4% 82.3% 81.6%

  46. Slide 46: Robust Credit Quality; NPL Ratio Stable at 1.4%

    Robust Credit Quality; NPL Ratio Stable at 1.4% NPL ratio 1.2% 1.2% 1.3% 1.4% 1.4% NPLs1 (SGD m) 2,442 2,504 2,551 2,882 2,841 3,000 344 401 2,500 351 218 377 158 Others 400 166 2,000 149 569 564 127 Greater China 335 372 313 249 250 1,500 289 238 Indonesia 292 386 401 378 388 423 Thailand 1,000 Mal

  47. Slide 47: Exposure to China

    Exposure to China Total = SGD19.5b Bank exposure in China or 5.9% of total assets  99% with <1 year tenor  Around 75% accounted for by top 5 domestic banks and policy banks Bank,  Trade exposures mostly with bank counterparties, SGD10.1b representing around half of bank exposure Debt, Non-bank ex

  48. Slide 48: Exposure to Commodities

    Exposure to Commodities Oil and gas Other As of Traders/ Upstream commodity Total 31 Mar 16 downstream industries segments industries Total SGD4.6b SGD8.4b SGD8.8b SGD21.8b exposure1 Outstanding SGD3.8b SGD5.1b SGD6.5b SGD15.5b loans 4% of total loans 7% of total loans  Total exposure, including of

  49. Slide 49: High Allowances Coverage

    High Allowances Coverage Total 200.0% Allowances / 147.0% 144.1% 142.7% 130.5% 133.2% Total NPL (%) 150.0% 100.0% General Allowances / 50.0% Gross Loans 0.0% net of Specific 1.4% 1.5% 1.4% 1.4% 1.4% Allowances (%) -50.0% 4,000 3,500 751 Specific 699 712 773 747 Allowances 3,000 (SGD m) 2,500 2,000 G

  50. Slide 50: Strong Capital and Leverage Ratios

    Strong Capital and Leverage Ratios 7.6% 7.6% 7.2% 7.3% 7.0% Leverage ratio 1 5.0% Total CAR 2 18.0% 17.1% 16.8% 16.4% 15.6% 16.0% 0% 16.0% 2.8% 2.8% 2.8% Tier 2 CAR 2 14.0% 2.6% 3.2% -20000% 12.0% -40000% 10.0% 8.0% 14.3% 14.0% 13.6% -60000% Tier 1 / CET1 CAR 2 6.0% 13.0% 12.8% 4.0% -80000% Fully-lo

  51. Slide 51: Stable Dividend Payout

    Stable Dividend Payout 20 5 5 10 35 50 50 40 35 20 20 20 2012 2013 2014 2015 Net dividend per ordinary share (¢) Interim Final Special UOB 80th Anniversary Payout amount (SGD m) 1,102 1,182 1,201 1,442 Payout ratio (%) 39 39 37 45 51

  52. Slide 52: Thank you

    i} UOB Thank you

United Overseas Bank — Investor Presentation (May 2016) on 6ix