United Overseas Bank Limited · SGX:U11
United Overseas Bank — Morgan Stanley 21st Annual Asia Pacific Summit (November 2022)
52 slides from United Overseas Bank's conference presentation, November 2022
Slide 1: UOB Group: Record net profit supported by balanced performance
UOB Group Record net profit supported by balanced performance November 2022 Discla imer: The mater ial in th is presentat ion conta ins gener al b ackgro un d informat ion a bout Un ite d Oversea s Bank L im ite d (“UOB”) and its act ivit ies as at the d ate of the pre sentat ion. The informat ion i
Slide 2: Agenda
1. Overview of UOB Group 2. Macroeconomic Outlook Agenda 3. Strong UOB Fundamentals 4. Our Growth Drivers 5. Latest Financials 2
Slide 3: Overview of UOB Group
Overview of UOB Group 3
Slide 4: UOB Overview
UOB Overview Founding Key Statistics for 9M22 Founded in August 1935 by a group of Chinese ■ Gross loans : SGD323b (USD226b1) businessmen and Datuk Wee Kheng Chiang, ■ Customer deposits : SGD375b (USD262b1) grandfather of the present UOB Group CEO, Mr. Wee ■ Loan / Deposit ratio : 85.2% Ee Cheong. ■
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 Singapore Best SME Bank in Singapore Strong player in Singapore dollar Strong player in credit cards and Seamless access to regional treasury inst
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 a
Slide 7: Comprehensive regional banking franchise
Comprehensive regional banking franchise Extensive regional footprint with ~500 offices 9M22 performance by segment Myanmar 2 offices Greater China1 27 offices UOB SGD140b 2 Operating Assets under +2% Thailand Vietnam management YoY Open profit 153 offices 5 offices Malaysia Philippines Group SGD1.4
Slide 8: Why UOB?
Why UOB? Integrated regional Balance growth with Stable management Strong fundamentals platform stability Proven track record in Entrenched domestic Sustainable revenue Continue to diversify steering the bank through presence and deep local channels as a result of portfolio, strengthen vario
Slide 9: Macroeconomic Outlook
Macroeconomic Outlook 9
Slide 10: Asian growth to sustain into 2023
Asian growth to sustain into 2023 2020 GDP growth 2022F GDP growth +4.8 …despite risks from Russia-Ukraine conflict & China 2023F GDP growth +2.2 +3.3 pandemic 65 China 60 53.5 50.7 50.1 +8.2 49.4 49.6 +6.6 55 +3.2 +3.7 +2.9 50 45 Thailand Vietnam 40 –6.2 35 +6.5 +4.0 30 ASEAN Mfg EM Services EM Mfg
Slide 11: Monetary policy to tighten as inflation spikes
Monetary policy to tighten as inflation spikes 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22f 4Q22f 1Q23f 2Q23f US 10-Year Treasury 1.74 1.47 1.49 1.51 2.34 3.01 3.83 4.40 4.40 4.10 US Fed Funds 0.25 0.25 0.25 0.25 0.50 1.75 3.25 4.50 5.00 5.00 SG 3M SIBOR 0.44 0.43 0.43 0.44 0.79 1.91 3.17 4.20 4.60 4.60 SG 3
Slide 12: Macro resilience across key Southeast Asian markets
Macro resilience across key Southeast Asian markets Significantly Higher Foreign Reserves Improved Current Account Balances (USD billion) (% of GDP) 286 15.6 12.8 199 131 106 1.6 2.2 75 30 24 26 –2.0 –0.5 –1.5 –5.5 Singapore Thailand Indonesia Malaysia Singapore Malaysia Thailand Indonesia Dec 1998
Slide 13: Singapore mortgages remain a low-risk asset class
Singapore mortgages remain a low-risk asset class Low risk of housing bubble due to cooling measures High national savings rate (2Q12 = 100) US, 215 (% of GDP) HK, 186 CA, 46 AU, 186 SG, 38 CA, 137 HK, 25 SG, 123 AU, 24 US, 21 2Q12 2Q14 2Q16 2Q18 2Q20 2Q22 2013 2015 2017 2019 2021 2023F Sources: CEI
Slide 14: Global regulators delayed capital rules by a year
Global regulators delayed capital rules by a year Year ’13 ’14 ’15 ’16 ’17 ’18 ’19 ’20 ’21 ’22 ’23 ’24 ’25 ’26 ’27 Basel III capital Phased-in Full ratios IFRS 9 | Start LCR1 Phased-in Full NSFR2 | Start SACCR3 | Start date (pending) TLAC4 Phased-in Full Basel IV5 Phased-in Full -- MCRMR6 | Start --
Slide 15: Basel III across the region
Basel III across the region BCBS Singapore Malaysia Thailand Indonesia Minimum CET1 CAR 4.5% 6.5%1 4.5% 4.5% 4.5% Minimum Tier 1 CAR 6.0% 8.0%1 6.0% 6.0% 6.0% Minimum Total CAR 8.0% 10.0%1 8.0% 8.5% 8.0% Capital Conservation Buffer 2.5% 2.5% 2.5% 2.5% 2.5% Countercyclical Buffer in n/a 0% 0% 0% 0% 2
Slide 16: Impact of Basel IV likely to be manageable
Impact of Basel IV1 likely to be manageable Retail credit LGD2 floor of Retail Mortgage cut LGD2 and PD3 floors introduced for QRRE4 Wholesale credit to 5% from 10% and Other Retail Others Unsecured corporate FIRB5 LGD2 cut CCF6 for unconditional cancellable to 40% from 45% commitments raised to 10%
Slide 17: Strong UOB Fundamentals
Strong UOB Fundamentals 17
Slide 18: Strong UOB fundamentals
Strong UOB fundamentals Disciplined Strong management Consistent and management of Delivering on with proven track focused financial balance sheet regional strategy record management strengths Proven track record in Responsible yet prudent Strong Common Equity Holistic regional bank, with st
Slide 19: Managing risks for stable growth
Managing risks for stable growth Prudent approach has been key to delivering sustainable returns over the years Manage con- Institutionalised framework through Group centration risk Risk Appetite Statement (GRAS): – Outlines risk and return objectives to guide Maintain strategic decision-making
Slide 20: Diversified loan portfolio
Diversified loan portfolio Housing loans Professionals Others 23% Transport, and private 5% individuals storage and 7% communication General 5% Industry commerce 12% FIs, investment Building & and holding construction companies 27% 13% Manufacturing Large corporates Others 8% and institutions 14% 56
Slide 21: Disciplined balance sheet management
Disciplined balance sheet management Return on risk-weighted assets Focus on Healthy 1.93% 1.90% 1.27% 1.68% 1.73% balance sheet portfolio FY18 FY19 FY20 FY21 9M22 efficiency quality Current Account Saving Account Balances (SGD b) 10.1% CAGR1 174 198 187 130 141 Proactive Robust liability FY18 FY19
Slide 22: UOB's responsible financing journey: pragmatic and progressive
UOB’s responsible financing journey: pragmatic and progressive Overview of UOB Group’s Responsible Financing Journey Establishing Improving Strengthening and Evolving 2015 - 2016 2017 - 2018 2019 - 2020 2021 - 2022 • Launched the Group • Enhanced ESG • Strengthened due • Established the Bank’s Envir
Slide 23: TCFD Implementation - Climate Scenario Analysis
TCFD Implementation - Climate Scenario Analysis Qualitative Transition Risk Transition Risk Scenario Physical Risk Pilot Analysis Improved Methodology Assessment Analysis Pilot 2019 2020 2021 2022 • Completed qualitative • Partnered an internationally • Conducted a pilot physical risk • Partnered wi
Slide 24: Comparison against peers
Comparison against peers Standalone Cost Returns Liquidity Strength Management Moody’s baseline Costs/income Return on average Loan/deposit Moody’s S&P Fitch credit assessment ratio assets (annualised) ratio Aa1 AA– AA– UOB a1 44% 0.9% 85% Aa1 AA– AA– OCBC a1 43% 1.3% 85% Aa1 AA– AA– DBS a1 42% 1.1%
Slide 25: Capital and leverage ratios
Capital and leverage ratios Reported Common Equity Tier 1 CAR 15.0% 14.9% 14.4% 14.1% 13.8% 13.7% 13.4% 13.1% 12.8% 12.6% 12.5% 12.2% 11.5% MBB TD OCBC CIMB DBS SCB HSBC RBC UOB BOA 1 NAB Citi CBA 1 Return on Average Equity (annualised) 9.3% 15.9% 11.5% 9.1% 14.3% 10.1% 9.2% 16.7% 11.2% 10.6% 11.3%
Slide 26: Strong investment grade credit ratings
Strong investment grade credit ratings Aa1 / P-1 A regular issuer in key debt capital markets globally Capital good by global standards GBP USD Additional (BBB+; Baa1; Tier 2, (A; A2; SGD Tier 1, BBB–)1 Deposit-funded and liquid balance sheet 9% 38% 24% BBB+)1 10% 11% Traditional banking prese
Slide 27: Our Growth Drivers
Our Growth Drivers 27
Slide 28: Our growth drivers
Our growth drivers Realise full potential Sharpen regional Reinforce fee income Long-term growth of our integrated focus growth perspective platform Provides us with ability to Global macro environment Grow fee income to offset Disciplined approach in serve expanding regional remains uncerta
Slide 29: Southeast Asia's immense long-term potential
Southeast Asia’s immense long-term potential Population GDP1 Southeast Asia’s … that UOB is uniquely (Million persons) (USD trillion) immense growth placed to capture prospects… Most diverse regional Third largest population franchise among Singapore 667 726 6.3 banks 581 globally, after China a
Slide 30: Strong retail presence in high potential regional markets
Strong retail presence in high potential regional markets High Vietnam 8 2019 retail banking pool sizes 3 Philippines USD b Denotes UOB’s core markets in Southeast Asia Banking penetration Indonesia ✓ was launched growth potential ✓ ✓ UAE in Thailand 21 (March 2019) and 12 Thailand Indonesia (August
Slide 31: 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 (2026) (SGD b) (SGD b) Markets where UOB has a presence CAGR c$21b c$55b +9% Singapore Thailand Vietnam c$4b c$1b c$1b c$13b c$12b +10% Malaysia Wealth c$7b
Slide 32: Wholesale: Growing regional franchise, capturing cross-border opportunities
Wholesale: Growing regional franchise, capturing cross-border opportunities Strengthening Connectivity +16%1 +52%3 Cross-border Suppliers and Across our ASEAN footprint income growth distributors within and global network (formed 29%2 of Financial Supply Chain Group Wholesale Management (FSCM) Banki
Slide 33: Consumers: Tapping on rising affluence and growing digitalisation in Southeast Asia
Consumers: Tapping on rising affluence and growing digitalisation in Southeast Asia Driving Digital Adoption 500k 2.4x1 New customers to be Year on year growth in Scale UOB TMRW across digitally acquired across the UOB TMRW customers ASEAN, reduce cost to serve region by UOB TMRW by in Indonesia and
Slide 34: Forging a sustainable future with our customers in ASEAN
Forging a sustainable future with our customers in ASEAN S$23b1 Supporting Total sustainability Helping SMEs to go green financing portfolio Launched UOB Sustainability businesses Compass, a tool to help SMEs identify steps that they can take >269k tCO2-e to go green in their businesses Contribution
Slide 35: Latest Financials
Latest Financials 35
Slide 36: 3Q22 financial overview
3Q22 financial overview Net Profit After Tax Movement, 3Q22 vs 2Q22 (SGD m) 371 48 158 173 33 5 46 +26% 1,403 1,113 +20% –8% +58% +15% –24% –22% +16% 2Q22 net Net interest Net fee and Other non- Operating Total Share of profit Tax and non- 3Q22 net profit after tax income commission interest expense
Slide 37: 9M22 financial overview
9M22 financial overview Net Profit After Tax Movement, 9M22 vs 9M21 (SGD m) 1,072 118 64 380 127 30 242 +12% 3,057 3,421 +23% –7% –7% +12% –23% –30% +38% 9M21 net Net interest Net fee and Other non- Operating Total Share of profit Tax and non- 9M22 net profit after tax income commission interest exp
Slide 38: Strong net interest margin expansion amid accelerated rate hikes alongside steady loan growth
Strong net interest margin expansion amid accelerated rate hikes alongside steady loan growth 3.00% 3.00% 11,500 Net interest 2.34% 3,90 margin (%) * 2.19% 2.16% 1.91% 1.89% 1.89% 1.90% 2.02% 10,500 1.87% ▬ Loans 2.00% 2.00% 3,40 ▬ Overall 1.82% 9,500 1.95% 1.78% 1.67% ▬ Interbank & 1.00% 1.57% 1.56
Slide 39: Non-interest income supported by diversified revenue engines
Non-interest income supported by diversified revenue engines 40.0% 34.2% 34.7% 34.6% % of total income 40.0% 5,100 31.1% 31.1% 150 28.5% 29.8% ▬ Non-interest income 4,600 ▬ Net fee income 20.0% 24.1% 20.0% 130 20.8% 23.5% 23.8% 24.3% 21.0% 4,100 16.3% 0.0% 0.0% 110 Non-interest 3,401 3,600 income (S
Slide 40: Fee income: credit card fees higher; wealth fees soft
Credit card fees higher alongside increased customer spend; wealth fees soft amid subdued market sentiment; loan-related fees moderated from last quarter’s high 850 Fee income 3,000 (SGD m) 2,706 750 Total 19 679 667 669 653 2,500 310 5 6 6 627 650 5 Others 2,226 82 82 81 4 139 78 13 37 85 Tra
Slide 41: Lower CIR as revenue growth outpaced cost increase
Lower CIR as revenue growth outpaced cost increase 2,000 50.0% 50.0%6,500 45.6% ▬ Costs / Income 43.9% 44.6% 44.1% 43.7% 45.0% 44.8% 43.8% 1,800 ratio (CIR, %) 42.6% 40.0% 40.0%5,500 1,600 1,357 1,400 Operating expenses 4,472 30.0% 4,313 30.0%4,500 4,184 (SGD m) 4,003 1,184 331 1,200 1,253 1,072 1,0
Slide 42: Diversified growth across our key markets
Diversified growth across our key markets 9M22 9M21 YoY 3Q22 2Q22 QoQ +/(–) +/(–) Operating profit SGD m SGD m % SGD m SGD m % Singapore 2,621 2,101 +25 1,078 845 +28 Rest of Southeast Asia 1,023 1,029 –1 386 318 +21 Malaysia 549 541 +2 216 162 +34 Thailand 291 301 –3 98 93 +6 Indonesia 166 181 –8 6
Slide 43: Steady loan growth across Singapore, SEA, North Asia and developed markets
Steady loan growth across Singapore, SEA (on constant currency terms), North Asia and developed markets Sep-22 Jun-22 QoQ Sep-21 YoY +/(–) +/(–) Gross Loans SGD b SGD b % SGD b % Singapore 165 163 +1 158 +4 Rest of Southeast Asia 63 64 –2 62 0 Malaysia 29 30 –1 29 (0) Thailand 20 21 –5 20 0 Indonesi
Slide 44: Exposure to Greater China
Exposure to Greater China 76.1 76.1 77.2 77.1 75.8 10.2 10.8 12.2 11.8 10.6 ~$3b in loans to Chinese Debt ($b) developers (1% of group Non Bank ($b) 49.5 48.8 51.5 52.5 53.8 loans & low borrower concentration) Bank ($b) 16.4 16.5 13.5 12.8 11.4 Sep Dec Mar Jun Sep 2021 2022 As at 30 Sep 2022: Bank
Slide 45: Exposure to Commodities
Exposure to Commodities Oil and Gas (O&G) Other Commodity Sep 22 Traders / downstream Total Upstream industries Segments2 industries1 Outstanding loans S$2.4b S$9.3b S$9.4b S$21.1b % of total loans 4% 3% 7% As of 30 September 2022, outstanding loans to commodities remain modest and represented 7% of
Slide 46: NPA formation normalised; NPL ratio improved to 1.5%
NPA formation normalised from previous quarter; NPL ratio improved to 1.5% (SGD m) 3Q21 4Q21 1Q22 2Q22 3Q22 NPAs at start of period 4,547 4,772 5,077 5,289 5,422 Non-individuals: New NPAs 251 670 462 661 214 Upgrades and recoveries (73) (172) (207) (363) (448) Write-offs (42) (205) (36) (123) (60) 4
Slide 47: Steady credit costs as asset quality remains benign
Steady credit costs as asset quality remains benign 80bp 3,000 80bp 1400 57bp 60bp 60bp Average Gross Loans 2,500 1200 (basis points) * 40bp 40bp 20bp 20bp 22bp 19bp 22bp ▬ Allowances for NPLs 18bp 17bp 16bp 20bpfor ▬ Total allowances 20bp 2,000 1000 24bp loans 17bp 18bp 20bp 19bp 21bp 15bp 16bp 0bp
Slide 48: Allowances sufficient amid ongoing macro uncertainties
Allowances sufficient amid ongoing macro uncertainties 12,000 106% 98% 96% 94% 91% Coverage ratios (%) 100% ▬ Total allowances* / NPAs 10,000 50% 34% 31% 31% 30% 33% ▬ Specific allowances / NPAs ▬ General allowance on loans* / 0% performing loans (%) 8,000 1.0% 1.0% 0.9% 0.9% 0.9% -50% 6,000 Allowan
Slide 49: Capital and leverage ratios
Capital and leverage ratios 20.00% 500 ▬ Common equity Tier 1 13.5% 13.5% 15.00% 13.1% 13.1% 12.8% 450 capital adequacy ratio (%) ▬ Leverage ratio (%) 10.00% 7.2% 400 7.1% 6.9% 6.6% 6.4% ▬ Return on risk-weighted 5.00% 350 assets (%) * 2.14% 300 1.71% 1.59% 1.36% 1.69% 250 200 Risk weighted assets
Slide 50: Sound funding and liquidity positions
Sound funding and liquidity positions 140% 900% 125% 116% 113% 114% ▬ Net stable funding ratio (%) 120% 111% 800% ▬ Group loan-deposit ratio (%) 100% 85.1% 87.0% 87.3% 88.7% 85.2% 700% ▬ USD loan-deposit ratio (%) 80% 600% 60% 72.3% 66.3% 64.2% 60.4% 61.6% 500% 40% 360% 400% Liquidity coverage ratio
Slide 51: Dividends in line with stable earnings and strong capital position
Dividends in line with stable earnings and strong capital position 20 Net dividend per ordinary share (¢) 60 Special 55 Final 39 Interim 55 60 60 39 2019 2020 2021 2022 Payout amount (SGD m) 2,171 1,304 2,011 1,005 Payout ratio (%) 50 451 49 50 Payout ratio (excluding special 42 451 49 50 divi
Slide 52: Right By You
Right By You
United Overseas Bank — Morgan Stanley 21st Annual Asia Pacific Summit (November 2022) on 6ix