United Overseas Bank Limited (SGX:U11), or UOB for short, is one of the leading banks in Asia, with a global network of around 500 offices in 19 countries and territories in Asia Pacific, Europe, and North America. However, its focus is on the Southeast Asia region.
This morning (27 April 2023), the Singapore-listed bank is the first of the 3 to release its business updates for the first quarter of the financial year 2023 ended 31 March (with DBS and OCBC releasing their results before trading hours on 02nd and 10th May respectively.)
As the bank have shifted to reporting its full financial results on a half-yearly basis, for the current quarter under review, they only provided a summary of its financial results, which we will be looking at in this post, together with some of the bank’s key financial ratios I always look at whenever I review a bank’s results.
Let’s begin:
Key Financial Figures (Q1 FY2022 vs. Q1 FY2023)
The following table are some of the key financial figures reported by UOB for Q1 FY2023, compared against the same time period last year (i.e. Q1 FY2022):
| Q1 FY2022 | Q1 FY2023 | % Variance | |
| – Net Interest Income (S$’mil) | $1,686m | $2,409m | +42.9% |
| – Net Fee & Commission Income (S$’mil) | $572m | $552m | -3.5% |
| – Other Non-Interest Income (S$’mil) | $101m | $563m | > +100.0% |
| Total Income (S$’mil) | $2,359m | $3,524m | +49.4% |
| Net Profit (S$’mil) | $906m | $1,511m | +66.8% |
My Observations: I must say that, the Singapore headquartered bank’s latest set of results is a very strong one – contributed by very strong improvements in its net interest income (up by 42.9%, bolstered by a 56 basis point uplift in net interest margin), as well as in its other non-interest income (which surged by more than 4 times, due to a record high trading and investment income.)
The only slight negative was the 3.5% dip in its net fee and commission income, due to softer loan-related and wealth management fees.
Finally, if Citi’s integration cost is excluded, its net profit, at $1,577m, is a record breaking one.
Key Financial Ratios (Q4 FY2022 vs. Q1 FY2023)
When it comes to reviewing a bank’s key financial ratios, there are 4 I focus my attention on – its net interest margin, return on assets, return on equity, as well as its non-performing loans ratio.
So, has these 4 ratios reported in the current quarter under review (i.e. Q1 FY2023 ended 31 March 2023) continue to remain resilient when compared against the last quarter 3 months ago (i.e. Q4 FY2022 ended 31 December 2022)? Let us have a look in the table below:
| Q4 FY2022 | Q1 FY2023 | Difference (in Percentage Points – pp) | |
| Net Interest Margin (%) | 2.22% | 2.14% | -0.08pp |
| Return on Assets (%) | 1.12% | 1.25% | +0.13pp |
| Return on Equity (%) | 13.9% | 14.9% | +1.0pp |
| Non-Performing Loans Ratio (%) | 1.6% | 1.6% | – |
My Observations: Net interest margin declined by 0.08pp, from liquidity surplus placed into high quality assets, and an increase in funding costs.
Apart from that, its return on assets and return on equity both saw improvements, along with its non-performing loans ratio stable at 1.6% – which are good to note.
CEO Wee Ee Cheong’s Comments & Outlook (from the Bank’s Performance Highlights)
“Recent pockets of banking instabilities in the US and Europe have led to some market volatility and added to concerns over the global growth outlook. Amid the challenging operating environment, our prudent management and long-term focus have put us in good stead.
We delivered record profits this quarter backed by our core businesses and diversified growth drivers. We also focused on strengthening our balance sheet, so that we can continue to support our customers through market cycles.
Our Citigroup integration is progressing well. We are on track to close in Indonesia by the end of the year after completing our acquisition in Malaysia, Thailand and Vietnam. As we scale up our regional franchise, we will continue to invest in capabilities and to forge partnerships.
Asia is poised to register growth this year and we are well-positioned to ride on the region’s economic recovery with our strong balance sheet, backed by healthy capital and liquidity positions.”
Closing Thoughts
As the Fed gradually hiked rates from March 2022 till the end of the year, its no surprises here that the bank’s net interest income saw a huge climb compared to last year (as the figures recorded for the period was when interest rates were still low.) This played a part in the bank’s net profit at a record high (if we exclude integration cost of Citi’s operations.)
Also, with the bank already completed the acquisition of Citibank’s consumer banking businesses in Thailand, Malaysia (in 01 November 2022, and you can read a full report about it here) and Vietnam (in 01 March 2023, and you can read a full report about it here), they will contribute positively to UOB’s financial results in the coming quarters ahead.
With that, I have come to the end of my review of UOB’s business update for the first quarter. As always, I hope you’ve found the contents above useful, and take note that this post does not constitute any buy or sell calls for the bank’s shares. You’re strongly encouraged to do your own due diligence before you make any investment decisions.
Related Documents
Disclaimer: At the time of writing, I am a shareholder of United Overseas Bank Limited.
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