Broad-Based Franchise Growth Brings UOB Record Earnings
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The bank’s total income for 2019 grows 10 percent to cross $10 billion, led by healthy client franchise growth and stronger trading and investment income. It is recommending a full-year dividend of S$1.30 per ordinary share.
UOB achieved record net earnings of $4.34 billion ($3.1 billion) in 2019, up 8 percent from 2018, the bank announced on Friday.
In particular, it noted higher net interest income, fee growth from wealth management and credit cards, and stronger trading and investment income. At the same time, its expenses grew by 12 percent year-on-year due to talent and technology investments, with a cost-income ratio of 44.6 percent.
Wholesale banking income grew 6 percent to S$4.1 billion in 2019, with 8 percent growth in non-Singapore income, 6 percent growth in non-real estate income, and 8 percent growth in non-loan income. Its retail business, which includes business banking, grew 9 percent from 2018 to S$4.3 billion. Income from high affluent customers increased 14% year on year, while assets under management in this segment grew by 14 percent to S$127 billion – 61 percent from overseas customers.
The bank’s net profit rose 10 percent in the fourth quarter to S$1.01 billion, up from S$916 billion a year ago, driven by growth in net interest income and trading and investment income.
Compared to its strong third-quarter, earnings fell 10 percent, but this was chalked up to seasonally lower fees and trading and investment income.
UOB said it is focused on riding Southeast Asia’s long-term growth potential, and will «grow selectively and seize opportunities within [its] target segments.»
“At the same time, its expenses grew by 12 percent year-on-year due to talent and technology investments, with a cost-income ratio of 44.6 percent.”
It is positioning its wholesale banking business to capture growing cross-border trade and investment flows. Its retail business hopes to ride on the growing affluence and wealth potential of the region’s rising middle class, using an omnichannel and ecosystem partnerships strategy.
In a presentation accompanying the results announcement, UOB said it would be rolling out its digital bank TMRW to Indonesia this year.
It noted the S$10 billion market opportunity in ASEAN, and said the digital bank is on track to be marginal cost positive within five years.
The bank said it expects downward pressure on customer margins in 2020, with a slight uptick in credit costs, given current conditions. However, it hopes to sustain momentum in fee income growth led by wealth management and to keep its cost/income ratio stable with a paced investment approach.
Wee Ee Cheong, deputy chairman and chief executive officer, acknowledged the challenging environment, particularly due to the effects of the Covid-19 epidemic, but noted the bank’s relief assistance measures to cushion its impact on customers.
We believe the region will weather this storm and are confident of ASEAN’s long-term potential. We will continue to invest in our capabilities, including digital, and seize the opportunities arising from the shifting economic environment, Wee said in the results statement.
Questions & Answers
Q.What factors contributed to the increase in the bank's total income for 2019?
What factors contributed to the increase in the bank's total income for 2019?
Total income grew by 10 percent due to healthy client franchise growth and stronger trading and investment income. This was further supported by higher net interest income and fee growth from wealth management and credit cards.
Q.How did the bank's expenses change in 2019, and what was the reason for this change?
How did the bank's expenses change in 2019, and what was the reason for this change?
Expenses increased by 12 percent year-on-year, driven by investments in talent and technology. Despite this, the bank maintained a cost-income ratio of 44.6 percent for the year.
Q.What is UOB's strategy for its retail business moving forward?
What is UOB's strategy for its retail business moving forward?
The retail business aims to capitalise on the rising affluence and wealth potential in Southeast Asia. It plans to achieve this using an omnichannel approach and strategic ecosystem partnerships.
Q.What challenges does UOB anticipate for 2020, and how does it plan to address them?
What challenges does UOB anticipate for 2020, and how does it plan to address them?
UOB expects downward pressure on customer margins and a slight increase in credit costs. It plans to sustain momentum in fee income, particularly from wealth management, and keep its cost/income ratio stable through paced investments.