United Overseas Bank, or UOB (SGX:U11), held its 78th annual general meeting (or AGM) last Friday, 05 June 2020, at 2.30pm. As a result of the ongoing Covid-19 pandemic, the meeting was conducted online and as a shareholder, I was in attendance to learn from the management (the meeting was conducted by the bank’s Chairman Mr Wong Kan Seng, and Deputy Board Chairman and CEO Mr Wee Ee Chong) the latest updates.

In this post, you’ll find a key summary of the bank’s AGM, which I’ve compiled for the benefit of those who did not attend the meeting:

Presentation by Deputy Board Chairman and CEO Mr Wee Ee Chong

There were three parts to Mr Wee’s presentation – (i) UOB’s response to Covid-19 pandemic, (ii) UOB’s performance for the financial year 2019, and (iii) outlook for the year ahead.

(i) UOB’s Response to Covid-19 Pandemic:

For its Customers:

  • To date, UOB have supported more than one million individuals and business customers across the regions (which the bank have a business presence in), where they had provided loan repayment moratoria/deferrals, extension of loan tenor, along with access to lower cost funding through government assisted loans.
  • Mr Wee shared that UOB is the first bank in Singapore to announce liquidity programmes for its customers during the pandemic, and that the bank have also digitalised the entire loan processing process.
  • Moving forward, Mr Wee added that the bank will continue to provide banking services, liquidity relief, as well as support to all of its customers (both individuals and businesses), along with continuing its digitalisation efforts to connect with its customers.

For its Workforce:

  • Mr Wee updated that most of the bank’s staffs are currently working from home.
  • For staffs who have to work on-site, the bank have implemented staggered working hours, split shifts, and split sites to ensure safe distancing. Also, masks and hand sanitisers have been provided.

For the Community:

  • Mr Wee shared that the bank have been doing its part to provide for those in need, including the provision of protective gear and masks, distribution of care parks, as well as raising funds for communities affected by the pandemic.

(ii) UOB’s Performance for Financial Year 2019:

  • Mr Wee updated that financial year 2019 was a record year for the bank, with its net profits up by 8% to a record S$4.3b. Some of the other key statistics that were highlighted include:
    • Total Income: Up by 10% to S$10.0b
    • Return on Equity: Up by 0.3 percentage points to 11.6%
    • Net Customer Loans: Up by 3% to S$265b
    • Customer Deposits: Up by 6% to S$311b
    • Total Assets: Up by 4% to S$404b
  • He reassured shareholders that the bank have a strong balance sheet, which allows it to be well-positioned to navigate the challenges ahead. He also commented that in the base case scenario, the pandemic should come under control by the end of the year, with the economy to gradually recover then, and that the bank will continue to keep a healthy liquidity and capital position to provide support to its customers.
  • In terms of loan portfolio, Mr Wee shared that it is healthy and well-diversified, where as of 31 March 2020:
    • More than half of the bank’s loans are in Singapore, with the remainder of the bank’s loans geographically diversified, without any concentration in a particular country
    • The bank’s customer segments are also well-diversified, with Mr Wee sharing that a majority of the bank’s SME customer base are from Singapore and Malaysia, with 80% of the loans secured by tangible assets
    • In terms of the bank’s loan portfolio by industry sector, a majority of them are from companies located in Singapore and Hong Kong, with most of them having good sponsors. Particularly, Mr Wee highlighted that the bank’s exposure to the oil & gas sector has been pared down and is now less than 4% of the bank’s total loans. He also added that the oil & gas companies (in the bank’s loan portfolio) are located in good locations with a low LTV
    • Moving forward, Mr Wee updated that the bank will continue to monitor its loan portfolio closely and conduct stress tests. He also expressed his confidence in the bank’s ability to see through the challenges ahead
  • In terms of the bank’s credit costs, Mr Wee said that it will go up by 50-60 basis points this year, and by similar points the next.
  • Finally, in terms of the bank’s dividend payouts for the year 2020 ahead, Mr Wee maintained that the bank will be paying out 50% of their earnings as dividends to shareholders, subject to its CET-1 ratio staying above 13.5%, along with a positive performance and outlook. He also added that the bank will continue to review and will communicate their dividend view later in the year when there is more clarity.

(iii) Outlook for the Year Ahead:

  • Mr Wee expressed his confidence in the potential of the ASEAN region in the long-term. Particularly, he highlighted the geopolitical tensions between the United States and China have led to an increasing number of companies looking to diversify or re-locate their business activities and supply chains in ASEAN countries, and UOB is poised to benefit from this (because of its business exposures in the region.)
  • Another area Mr Wee touched on was the bank’s award-winning digital bank, TMRW (ASEAN’s first mobile-only, digital bank for millennials), launched in Thailand and Indonesia. He foresees the use of digital banking to increase in the future, and that the bank will continue to invest in the right capabilities to drive transformation.
  • Moving forward, Mr Wee said together with his team, they will continue to build the bank’s legacy and shape it for the future. Aside from investing in people and capabilities for the future, the bank will also work closely with its customers, industry partners, and the wider community to ride through the headwinds caused by current Covid-19 pandemic, and emerge stronger.
  • Finally, Mr Wee gave his assurance that the bank is committed to achieve sustainable returns and growth for its shareholders.

Highlights on Particular Questions Raised by Shareholders

Mr Wong Kan Seng addressed some of the questions raised by the bank’s shareholders, particularly relating to the possibility of paying out their final dividends earlier, and also whether or not directors’ fees will be reduced in light of the Covid-19 pandemic:

Possibility of Paying out Final Dividends Early, and Application of Scrip Dividends on the Bank’s Final Dividend Payout:

  • Mr Wong explained that it was not possible for payments of the final dividends declared for FY2019 (consisting of a final dividend of 55 cents/share, and a special dividend of 20 cents/share) to be made earlier, as it required approval by shareholders during the AGM before payments could be made.
  • He also added that scrip dividends would not be applied to the final and special dividends declared for FY2019.

Reduction of Directors’ Fees in Light of Covid-19 Pandemic:

  • Mr Wong shared that, based on a survey conducted by Non Hewitt last year, the bank’s directors’ fees were found to be below market average.
  • However, he added that, in view of the current Covid-19 pandemic, the bank will suspend any increase in directors’ fees.

My Personal Thoughts

Just like OCBC, UOB will also be paying out 50% of their earnings to shareholders as dividends in the year 2020 ahead. As such, we have to be mentally prepared for dividends to be lower (compared to 2019) as it is very likely that the bank will report a weaker set of results due to headwinds related to Covid-19.

It will be a bonus in my opinion if the bank can continue to maintain its current dividend payout this year to be like the previous year (i.e. FY2019), where an interim dividend of 55 cents/share, and a final dividend of another 55 cents/share, plus a special dividend of 20 cents/share, were declared.

Despite that, I remain confident of UOB’s management capability in navigating the bank through the Covid-19 pandemic, and record even stronger growth in the years ahead.

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Disclaimer: At the time of writing, I am a shareholder of United Overseas Bank Limited.

 

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