United Overseas Bank Limited (SGX:U11), or UOB as it is more commonly known, is the 2nd of the 3 Singapore-listed banks to hold its annual general meeting (AGM) for the financial year ended 31 December 2022 last Friday afternoon (21 April 2023) – the first was DBS on 31 March (and you can read my AGM summary here), and OCBC will be holding its AGM tomorrow (25 April.)
UOB is the only one to offer the option for shareholders to attend the meeting virtually (which I fully appreciate this move, as Singapore moves towards being a ‘digitalised’ nation) – however, those who choose this option will need to submit their votes for the resolutions tabled in the meeting in advance, and attendees will not be able to ask any questions ‘live.’
Personally, I opted for the latter, as I do not have any questions to ask. Also, the time saved from travelling to and from the meeting can be put into compiling this summary.
For the benefit of those who were unable to attend, you can read a summary of the presentation by the bank’s CEO, Mr Wee Ee Cheong, responses to questions raised by AGM attendees who attended the meeting in-person, along with results of 11 resolutions put to vote during the meeting.
Let’s begin:
Presentation by CEO Mr Wee Ee Cheong
2022 Performance Review:
- Despite volatility in the global financial market, Singapore continues to remain stable, and banks in the country are very well-regulated.
- For the financial year under review, UOB’s balance sheet continues to remain very strong. This is on top of its very resilient asset quality.
- The same can be said for the bank’s liquidity, where it continues to remain healthy.
- Here are some of the key financial highlights reported by the bank for FY2022 (with percentage improvement compared to FY2021 in brackets):
- Core net profit at a record high of S$4.8 billion (up 18%, FY2021: S$4.1 billion)
- Core operating profit at $6.6 billion (up 20%, FY2021: S$5.5 billion)
- Gross Customer Loans at $320 billion (up 3%, FY2021: S$311 billion)
- Customer Deposits at $369 billion (up 5%, FY2021: S$353 billion)
- Total Assets at $504 billion (up 10%, FY2021: S$459 billion)
- Non-Performing Loan Ratio at 1.6% (unchanged)
- Net Stable Funding Ratio stable at 116% (unchanged)
- Common Equity Tier-1 Ratio at 13.3% (down 0.2 percentage points, FY2021: 13.5%)
- Total Dividend Per Share for FY2022 at $1.35 (which represents a 49% payout ratio; FY2021: S$1.20)
Key Growth Drivers:
- Asia is holding up well with steady growth, where it benefitted from China’s reopening, which drove demand. This benefited ASEAN, as the region is China’s largest trade partner in the world at US$900 billion. UOB, with its focus in ASEAN, can capture trade and investment flows in the region, by providing a seamless one-stop solution for its clients.
- The bank’s acquisition of Citigroup’s retail operations (in Malaysia, Thailand, Vietnam, and Indonesia) is expected to add about S$1 billion to its retail business this year, with its retail customer base expected to cross 8 million.
- The acquisition is a positive one for the bank because Citigroup specialises in credit card and unsecured lending, while UOB specialises in deposit and secured lending – providing an opportunity for UOB to cross-sell, by presenting the right product to the right customers.
- On its digital banking front, UOB TMRW have reached an important milestone of acquiring 1 million new retail customers since its launch in 2019. The bank have also launched the UOB SME app to allow SMEs to bank-on-the-go, as well as expanded the UOB Infinity app for its corporate customers in 8 markets.
ESG Efforts:
- UOB remains a responsible financial steward to help all stakeholders to build the future of ASEAN, and the bank remains committed towards its goal of achieving Net Zero carbon emissions by 2050 – for the start, its plans cover 6 sectors that make up 60% of its corporate lending portfolio – Power, Automotive, Oil and Gas, Real Estate, Construction, and Steel.
- The bank have have also introduced ‘The UOB Way’ to build employee pride. This is on top of initiatives to help its colleagues reach their full potential through re-training and re-skilling.
Outlook Ahead:
- Uncertainty remains in the global environment, with the United States and Europe possibly entering a shadow recession.
- Tensions between US and China may also lead to a diversification in global supply chains.
- Asia, however, is poised to remain its resiliency, with growth projected to be about 5% in 2023.
- In Singapore, financial system continues to remain strong and robust.
- UOB’s focus on the long-term, and also its customer-centric approach, are here to stay. The bank remains committed to achieve sustainable growth and returns.
Responses to Questions Raised by AGM Attendees In-Person
- In light of the one-day disruption to DBS’ digital banking system in late-March 2023, a shareholder wanted to know about the stability of UOB’s digital banking platform TMRW, and their action plans should its services suffer from a disruption. Mr Wee said the management is constantly monitoring its performance, and have plans put in place to restore its operations as soon as possible in event of a disruption. Ms Susan Hwee, UOB’s Head of Technology and Operations, added that the entire technology platform that provides digital banking access for its customers in all countries are operated and managed in Singapore, and she reassured the shareholder that the technology platforms are well built-up and resilient to handle peak transactional periods (such as the New Year, Chinese New Year, Christmas, as well as during major e-commerce platform sales events like 11.11.)
- Citing swaths of withdrawal by high net worth clients leading to Silicon Valley Bank’s downfall back in early-March, the same shareholder wanted to know how the bank’s management would cope with a similar situation should it happen. Mr Wee reassured the shareholder by citing Singapore’s strong AAA credit rating, along with the banks here being very well-regulated by the Monetary Authority of Singapore (MAS.) He added that the bank does not have concentration risk (in terms of the number of high net worth clients, or in its business operations), and that it has ample liquidity (well above the regulatory level) to cope with unexpected situations.
- A shareholder cited that Credit Suisse, which collapsed last month (March 2023), had similar sets of financial ratios compared to UOB’s (with its CET-1 ratio at 14.1% vs. UOB’s 13.3%, and LCR at 144% vs. UOB’s 140%), and asked about steps the management have taken to instill confidence on the bank in light of this. Mr Chan Kok Seong, the bank’s Chief Risk Officer explained that financial ratios only illustrate part of how a bank is managed, and one will have to look beyond these numbers. He shared that over the many years in operation, the bank have been through many business cycles, and with every cycle, the bank emerged stronger – a testament of its ability to ride through the ups and downs. Plus, the fact that UOB is headquartered in a country that is AAA credit rated (in Singapore) will further instil confidence.
- One shareholder asked about the possibility of the bank paying out dividends on a quarterly basis, to which Mr Wong Kan Seng, the Chairman of UOB, said the practice of most companies in Singapore is to pay out dividends on a half-yearly basis. Additionally, by paying out dividends in this time frequency, it will give the bank more flexibility when it comes to capital management.
- In view of the uncertainties arising from geopolitical tensions (US-China, US-China-Taiwan tension, Russia’s invasion of Ukraine), interest rate fluctuation, and the possibility of the United States entering into a recession, a shareholder wanted to know the management’s view on the outlook, along with how the bank will navigate through the challenges. In response, Mr Wee said that it is likely the United States and Europe will fall into a recession, with the ripple effects leading to Asia’s economy slowing down. However, he is of the view that ASEAN is likely to remain relatively safe. He reassured the shareholder that the bank have ample liquidity residing in Central Banks (from its annual report for FY2022, it was noted that the bank had S$42.3 billion in non-restricted balances with Central Banks) to deal with any unexpected situations.
- Given the political situation in Myanmar, and that the bank has a branch in Yangon, along with United Overseas Insurance (UOI) having a business presence in the country, a shareholder wanted to know if there are any material impacts on the bank. Mr Wong said that the bank had minimised its exposure particularly after the political incident, and currently, it is managing just the existing businesses. Also, a majority of its customers are from Singapore.
- Responding to a question on the Government treasury bills that UOB has, currency denomination, along with its average term, Mr Chan said that most of them are for liquid asset requirement (as required by the Monetary Authority of Singapore for regulated commercial banks), are hugely Singapore Dollar denominated, with the average term about 3 years.
- Finally, on a question regarding funding to build its new global technology and innovation centre in Punggol Digital District, Mr Wong said it will be funded from internal resources.
Results of Resolutions Put to Vote during the AGM
- Resolution 1, on the audited financial statements, directors’ statement, and auditors’ report was passed with 99.93% of the votes for, and 0.07% of the votes against.
- Resolution 2, on final dividend, was passed with 99.99% of the votes for, and 0.01% of the votes against.
- Resolution 3, on directors’ fees, was passed with 99.86% of the votes for, and 0.14% of the votes against.
- Resolution 4, on auditor and its renumeration, was passed with 97.02% of the votes for, and 2.98% of the votes against.
- Resolution 5, on the re-election of Mr Wee Ee Cheong, was passed with 92.51% of the votes for, and 7.49% of the votes against.
- Resolution 6, on the re-election of Mr Steven Phan Swee Kim, was passed with 98.12% of the votes for, and 1.88% of the votes against.
- Resolution 7, on the re-election of Dr Chia Tai Tee, was passed with 98.97% of the votes for, and 1.03% of the votes against.
- Resolution 8, on the re-election of Mr Ong Chong Tee, was passed with 99.28% of the votes for, and 0.72% of the votes against.
- Resolution 9, on the authority to issue ordinary shares, was passed with 91.78% of the votes for, and 8.22% of the votes against.
- Resolution 10, on the authority to issue ordinary shares pursuant to the UOB Scrip Dividend Scheme, was passed with 99.89% of the votes for, and 0.11% of the votes against.
- Resolution 11, on the renewal of share purchase mandate, was passed with 99.08% of the votes for, and 0.92% of the votes against.
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Disclaimer: At the time of writing, I am a shareholder of United Overseas Bank Limited.
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