Following DBS (you can read my review of its latest results here), United Overseas Bank Limited (SGX:U11), or UOB for short, is the second of the three Singapore-listed banks to release its results for the fourth quarter, as well as for the full year ended 31 December 2022 (i.e. FY2022) before market hours this morning (23 February 2023.) In case you’re not already aware, OCBC will be releasing its results tomorrow (24 February) morning.
Just like DBS, you should be very familiar with UOB as well, where the Singapore bank has many physical branches and ATMs scattered across Singapore. Apart from the bank’s home country, it also have banking subsidiaries in China, Indonesia, Malaysia, Thailand, and Vietnam, as well as branches and offices throughout the region.
In the rest of this post, you’ll find my review of UOB’s latest financial performance, financial ratios, and dividend payout declared.
Let’s begin:
Financial Performance (Q4 FY2021 vs. Q4 FY2022, and FY2021 vs. FY2022)
In this section, you’ll find my review UOB’s financial performance first on a quarter-on-quarter (q-o-q) basis (i.e. Q4 FY2021 vs. Q4 FY2022), and then on a year-on-year (y-o-y) basis (i.e. FY021 vs. FY2022):
Q4 FY2021 vs. Q4 FY2022:
| Q4 FY2021 | Q4 FY2022 | % Variation | |
| – Net Interest Income (S$’mil) | $1,677m | $2,560m | +52.7% |
| – Net Fee & Commission Income (S$’mil) | $580m | $485m | -16.4% |
| – Other Non-Interest Income (S$’mil) | $177m | $285m | +61.0% |
| Total Income (S$’mil) | $2,434m | $3,330m | +36.8% |
| Total Expenses (S$’mil) | $1,095m | $1,418m | +29.5% |
| Net Profit (S$’mil) | $1,017m | $1,398m | +37.5% |
My Observations: Apart from the decline in its net fee and commission income due to softer wealth management and loan related fees, UOB’s latest results for the fourth quarter of the financial year under review (compared against the same time period last year) was a very positive one in my opinion.
The 52.7% jump in its net interest income (to $2,560m, a new high) was very much expected, given the series of interest rate hikes announced by the Federal Reserve in 2022, where banks are direct beneficiaries – its net interest margin saw a 66 basis point expansion (compared to Q4 FY2021), and its loan growth went up by 3%. Finally, its other non-interest income also climbed by 61.0% from higher customer-related treasury income.
FY2021 vs. FY2022:
| FY2021 | FY2022 | % Variation | |
| – Net Interest Income (S$’mil) | $6,388m | $8,343m | +30.6% |
| – Net Fee & Commission Income (S$’mil) | $2,357m | $2,143m | -9.1% |
| – Other Non-Interest Income (S$’mil) | $1,044m | $1,089m | +4.3% |
| Total Income (S$’mil) | $9,789m | $11,575m | +18.2% |
| Total Expenses (S$’mil) | $4,313m | $5,016m | +16.3% |
| Net Profit (S$’mil) | $4,075m | $4,819m | +18.3% |
My Observations: Similar to its results for the fourth quarter, UOB’s results for the full year was, in my opinion, a stellar one – in particular, its net profit at $4,819m for FY2022 was a new high.
The strong bottom-line was contributed by a 30.6% hike in its net interest income (as a result of a robust net interest margin expansion of 30 basis points to 1.86% on rising interest rates, along with a loan growth of 3%), along with a 4.3% improvement in its other non-interest income (due to a 20% growth in its customer-related treasury income, driven by hedging demands amid market volatility, partly offset by impact on hedges and lower valuation on investments.)
The 9.1% decline in its net fee & commission income can be attributed to muted investor sentiments weighing on wealth and fund management fees.
Financial Ratios (Q3 FY2022 vs. Q4 FY2022, and FY2021 vs. FY2022)
Moving on, let us take a look at some of the key financial ratios (I always look at these 4 – net interest margin, return on assets, return on equity, and non-performing loans ratio) reported by UOB.
You’ll find a comparison of the financial ratios recorded for the current quarter under review (i.e. Q4 FY2022 ended 31 December 2022) against that recorded in the previous quarter 3 months ago (i.e. Q3 FY2022 ended 30 September 2022), as well as that recorded for the full year under review (i.e. FY2022) compared against the previous year (i.e. FY2021), in the 2 tables below:
Q3 FY2022 vs. Q4 FY2022:
| Q3 FY2022 | Q4 FY2022 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 1.95% | 2.22% | +0.27pp |
| Return on Assets (%) | 1.13% | 1.12% | -0.01pp |
| Return on Equity (%) | 14.0% | 13.9% | -0.01pp |
| Non-Performing Loans Ratio (%) | 1.5% | 1.6% | +0.1pp |
My Observations: 2 things to note here – the 0.27pp jump in its net interest margin compared to the previous quarter (i.e. Q3 FY2022), as well as a 0.1pp increase in its non-performing loans ratio – the former was due to aggressive rate hikes by the Federal Reserve, along with a healthy loan momentum (a positive), while the latter was due to the inclusion of non performing assets from Citibank’s portfolio following UOB’s acquisition of its Malaysia and Thailand operations (completed in November 2022, and you can read the news report about it here.)
FY2021 vs. FY2022:
| FY2021 | FY2022 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 1.56% | 1.86% | +0.3pp |
| Return on Assets (%) | 0.92% | 0.99% | +0.07pp |
| Return on Equity (%) | 10.2% | 11.9% | +1.7pp |
| Non-Performing Loans Ratio (%) | 1.6% | 1.6% | +0.0pp |
My Observations: Compared to last year, UOB’s key financial ratios is largely positive, with growth seen in its net interest margin (as a result of Fed’s interest rate hikes, along with a healthy loans growth), return on assets, and return on equity.
Non-performing loans ratio have also remained stable at 1.6%.
Dividend Payout to Shareholders
The management of UOB declares a dividend payout to its shareholders on a semi-annual basis – once when it releases its results for the second quarter and first half of the year (known as interim dividend), and once when it releases its results for the fourth quarter and full year (which is this time round, and it is known as final dividend.)
For the second half of FY2022 (period between 01 July and 31 December 2022), the management have declared a payout of 75.0 cents/share – a 25.0% increase compared to the payout of 60.0 cents/share in the second half of FY2021.
On a full-year basis, together with its payout of 60.0 cents/share for the first half of the year, its dividend payout amounts to 135.0 cents/share (and this represents a 49% dividend payout ratio – in-line with what the management have guided to payout 50.0% of its earnings as dividends.) Compared to its total dividend payout of 120.0 cents/share in FY2021, this represents a 12.5% improvement. Also, its full year payout for FY2022 is back to pre-Covid levels (where in FY2019, its full year dividend payout was at 130.0 cents/share).
Finally, if you are a shareholder of UOB, do take note of the following dates regarding its dividend payout:
Ex-Date: 28 April 2023
Record Date: 02 May 2023
Payout Date: 12 May 2023
CEO Wee Ee Chong’s Statement (from the Bank’s Press Release)
“The Group delivered a record net profit for the year, on higher margins driven by our robust core businesses, strong balance sheet and resilient asset quality.
Importantly, 2022 was a milestone year for UOB with our acquisition of Citigroup’s consumer banking businesses in four markets. Last November, we completed the acquisition in Malaysia and Thailand and we aim to close in Indonesia and Vietnam this year. This transformational deal, sealed in the midst of the pandemic, positions us well in our strategic ambitions in the regional consumer banking space. We are excited to serve our enlarged customer base of 7 million with our expanded network and strengthened capabilities.
The ASEAN region is vibrant with immense longterm potential. We remain positive on the region despite the global economic gloom in the near term. Looking ahead, we are confident that our strategy of seeking growth while ensuring stability w ill continue to create value for our customers and other stakeholders.”
Closing Thoughts
Pretty resilient set of results reported by the bank – where its net interest income for Q4, along with its net profit for the full year 2022 reached new highs. In terms of dividend payout, it was also in-line with the management’s guidance (which was to pay out 50.0% of its earnings as dividends.)
Personally, both its financial results, along with key financial ratios I look at (whenever I evaluate a bank’s results) were all within my expectations.
Looking ahead, I am of the opinion that tailwinds for the bank will include contributions from Citibank’s operations in Malaysia and Thailand, along with the continued high interest rate environment (which will benefit the bank – but growth in my opinion will not be as strong as what we’ve seen this year as it is likely the Federal Reserve will slow down the rate of hike this year.) On the other hand, as a result of the economic headwinds, we may see a slowdown in loans growth from consumers and businesses (and this may impact the growth of the bank’s net interest margin.) Another thing to keep a lookout for is the potential rise in the number of defaults by the bank’s customers, which may see its non-performing loans ratio going up.
Finally, as far as dividend payouts are concerned, there is no mentioning about the exact amount the bank’s management will declare ahead, but my guess is that it should be the same (which is 50.0% of its earnings.) I’m not going to make any speculations about the possible dividend hikes ahead but in my opinion, in light of the tough economic headwinds, if they can maintain their payout for the year (interim payout of 60.0 cents, and final payout of 75.0 cents), it will be considered to be pretty good already.
That said, it’s just my personal opinion to share. The contents above does not constitute any buy or sell calls for the bank’s shares. As always, please do your own due diligence before you make any investment decisions.
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Disclaimer: At the time of writing, I am a shareholder of United Overseas Bank Limited.
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