United Overseas Bank, or UOB (SGX:U11) is the last of the 3 Singapore-listed banks to release its financial results for the fourth quarter, and for the full-year 2020 ended 31 December 2020 this morning (25 February 2021) before market hours.

I have gone through the documents provided and in today’s post, you will find a summary of the key financial figures and statistics, dividend payout declared, along with my personal thoughts as a shareholder of the Singapore-listed bank.

Let’s begin…

Key Financial Results (Q4 FY2019 vs. Q4 FY2020, and FY2019 vs. FY2020)

In this section, let us take a look at the bank’s latest set of financial results both on a quarter-on-quarter (q-o-q) basis, as well as on a year-on-year (y-o-y) basis:

Q4 FY2019 vs. Q4 FY2020:

Q4 FY2019Q4 FY2020% Variance
– Net Interest
Income (S$’mil)
$1,635m$1,512m-7.5%
– Net Fee &
Commission Income
(S$’mil)
$476m$522m+9.7%
– Other Non-Interest
Income (S$’mil)
$321m$214m-33.3%
Total Income
(S$’mil)
$2,432m$2,249m-7.5%
Total Expenses
(S$’mil)
$1,116m$1,049m-6.0%
Net Profit
Attributable to
Shareholders
(S$’mil)
$1,006m$688m-31.6%

As expected, the bank’s latest set of q-o-q results was by and large a weaker one (the only statistic that saw improvements was its net fee and commission income, which was driven by growth in wealth management, fund management, and loan-related fees.)

Looking at some of the other statistics, the 7.5% decline in the bank’s net interest income was due to lower interest rates, while the 33.3% drop in its other non-interest income was due to lower net trading income.

As a result of a huge spike in allowance for credit and other losses (from S$146m in Q4 FY2019 to a high of S$396m in Q4 FY2020), its net profit attributable to shareholders tumbled 31.6% to S$688m.

FY2019 vs. FY2020:

FY2019FY2020% Variance
– Net Interest
Income (S$’mil)
$6,563m$6,035m-8.0%
– Net Fee &
Commission Income
(S$’mil)
$2,032m$1,997m-1.7%
– Other Non-Interest
Income (S$’mil)
$1,435m$1,114m-20.3%
Total Income
(S$’mil)
$10,030m$9,176m-8.5%
Total Expenses
(S$’mil)
$4,472m$4,184m-6.9%
Net Profit
Attributable to
Shareholders
(S$’mil)
$4,343m$2,915m-32.9%

Compared to results recorded a year before (i.e. FY2019) which was before the pandemic, its results were weaker (this was expected due to the massive headwinds the bank had to navigate against as a result of the ongoing pandemic.)

The bank’s net interest income was down 8.0% as a result of reduced interest rates, its net fee and commission income dipped by 1.7% from a drop in credit card spending by consumers, and its other non-interest income fell by 20.3% due to a lower net trading income on the back of a volatile market in 2020.

Total allowances also spiked from S$435m in FY2019 to S$1.55b in FY2020, thus contributing to a drop in its net profit attributable to shareholders by 32.9%.

My Thoughts: As I have mentioned earlier, the bank’s latest set of q-o-q and y-o-y results (both were weaker) as within my expectations due to the massive headwinds from the ongoing Covid-19 pandemic.

Key Financial Ratios (Q3 FY2020 vs. Q4 FY2020, and FY2019 vs. FY2020)

Moving on, let us take a look at some of the key financial ratios reported by the bank – where I will be comparing the ratios recorded for the current quarter under review (i.e. Q4 FY2020 ended 31 December 2020) against that recorded in the previous quarter three months ago (i.e. Q3 FY2020 ended 30 September 2020), as well as the ratios recorded for the full-year under review (i.e. FY2020) against the previous year (i.e. FY2019):

Q3 FY2020 vs. Q4 FY2020:

Q3 FY2020Q4 FY2020Difference (in
Percentage Points)
Net Interest
Margin (%)
1.53%1.57%+0.04pp
Return on
Assets (%)
0.63%0.65%+0.02pp
Return on
Equity (%)
6.9%7.0%+0.1pp
Loan/Deposit
Ratio (%)
86.7%85.4%-1.3pp
Non-Performing
Loans Ratio (%)
1.5%1.6%+0.1pp

My Thoughts: Compared to three months ago, other than its non-performing loans ratio edging up slightly, the other key statistics in net interest margin, return on assets, as well as return on equity all saw improvements, suggesting that a recovery is in sight.

FY2019 vs. FY2020:

FY2019FY2020Difference (in
Percentage Points)
Net Interest
Margin (%)
1.78%1.57%-0.21pp
Return on
Assets (%)
1.08%0.69%-0.4pp
Return on
Equity (%)
11.0%7.1%-3.9pp
Loan/Deposit
Ratio (%)
85.4%85.4%
Non-Performing
Loans Ratio (%)
1.5%1.6%+0.1pp

My Thoughts: Just like my y-o-y review of the bank’s financial results in the previous section, the latest financial statistics posted by the bank was within my expectations, taking into account that for almost the whole of the year 2020, the world was grappling with the Covid-19 pandemic.

Dividend Payout to Shareholders

A dividend payout of 39.0 cents/share was declared for the current quarter under review. Together with the 39.0 cents/share declared when the bank released its second quarter results, the total dividend payout for the financial year 2020 amounted to 78.0 cents/share – this was in-line with the Monetary Authority of Singapore’s (MAS’) advise for dividends to be capped at 60.0% of FY2019’s payout of 130.0 cents/share.

Shareholders have the option to opt to receive shares of the bank instead of cash (which is the default option.) The price of each share will be determined based on the average of the closing prices between 06 and 07 May 2021 (both dates inclusive), and the bank will be announcing the issue price on 10 May 2021.

The ex-dividend date will be on 06 May 2021, with the record date on 07 May 2021, and payout date on 25 June 2021. If you opt to receive shares of the bank instead, it will be credited on the same date as well.

In Conclusion

The q-o-q, as well as y-o-y decline in the bank’s financial results was within my expectations as a result of the ongoing Covid-19 pandemic.

However, we can see some positives in that the financial ratios have improved when compared against that recorded in the previous quarter 3 months ago.

I am of the view that with the introduction of the vaccine, and with countries slowly vaccinating the population, we should see a gradual return to normalcy ahead (even though it will be a slow one), and in terms of results of the bank in the quarters ahead, it should be an improved one.

Finally, the bank will be conducting its annual general meeting on Friday, 30 April 2021. I await for further details on the timing and registration and will provide updates on my InvestingNote profile, as well as on The Singaporean Investor’s Telegram channel as soon as I have them.

With that, I have come to the end of my review of UOB’s latest results update. Do take note that everything you have just read above is for educational purposes only, and they do not represent any buy or sell calls for the bank’s shares. You should always do your own due diligence before making any investment decisions.

Related Documents

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

 

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