Operating through its head office in Singapore, and banking subsidiaries in China, Indonesia, Malaysia, Thailand, and Vietnam, United Overseas Bank Limited (SGX:U11), or UOB for short, has a global network of about 500 branches and offices in 19 countries and territories in Asia Pacific (194 in Thailand, 133 in Indonesia, 65 in Singapore, 58 in Malaysia, 20 in China, 7 in Vietnam, 2 in Brunei, Hong Kong, India, Japan, Myanmar, and Taiwan, and 1 in Australia, South Korea, and the Philippines), Europe (1 in France and in the United Kingdom), and North America (3 in Canada, and in the United States of America).

UOB is rated among one of the world’s top banks – Aa1 by Moody’s Investor Service, and AA- by both S&P Global Ratings and Fitch Ratings.

UOB's Annual Report for FY2023

Last Thursday (21 March 2024) morning, the Singapore-headquartered bank published its annual report for the financial year ended 31 December 2023 (i.e., FY2023), and for the benefit of those who do not have time to go through it, you can find key highlights in this post, together with details about its upcoming Annual General Meeting, or AGM for short.

Let’s begin:

A Record Performance despite Global Uncertainties and Challenges:

  • Amid the global uncertainties and challenges around the world (some of the events include the US regional banking crisis, ongoing Russia-Ukraine war, US-China tensions, Israel-Hamas conflict, subdued consumer sentiments in China), UOB achieved a record high core net profit of S$6.1 billion, up 26% compared to last year. However, if one-off Citigroup integration expenses is included (side note: this one-off costs for the acquisition will largely taper off in 2024, and the bank will focus on tapping synergies to cross-sell to its expanded customer base), net profit was at S$5.7 billion (which is also a record for the bank).
  • Net interest income rose 16% from a year ago to $9.7 billion, driven by a 23 basis point increase in is net interest margin (to 2.09%), with loan growth of 2% in constant currency. Net fee income grew 4% to $2.2 billion on the back of higher wealth fees and record credit card fees (which surged 66% to $382 million). Other non-interest income doubled to $2.0 billion, driven by all-time high customer-related treasury income and strong performance from trading and liquidity management activities.
  • Total core operating expenses was up by 15% to $5.8 billion (due to broad-based expense growth to support strategic initiatives), with total allowance at $921 million due to higher specific allowance on a few non-systemic corporate accounts, and pre-emptive general allowance set aside during the year.
  • Asset quality remained stable, with non-performing loans ratio at 1.5%, non-performing assets coverage at 101% or 209% after taking collaterals into account.
  • Given the bank’s resilient performance, the Board recommends a final dividend of 85 cents per ordinary share, bringing its total dividend for FY2023 to $1.70 per ordinary share.

Key Growth Highlights:

  • UOB scaled up its regional businesses in 2023 following its acquisition of Citigroup’s consumer banking business in 4 ASEAN markets (and this helped to grow the bank’s retail base to more than 8 million across the region), which provides the foundation for the bank to become the preferred bank of choice in ASEAN – Acquisitions in Indonesia and Malaysia have been fully integrated, with integration for Thailand and Vietnam to be completed by the 1st half of 2024, and by end-2025 respectively. The transformational deal has accelerated UOB’s growth in the region by 5 years.
  • A 3-year plan was developed to help UOB reach its goal of becoming the most preferred bank in Southeast Asia. To achieve this, the bank have been (i) reshaping its business to drive ASEAN connectivity and cross border trade; (ii) leveraging the enlarged customer base and synergies from the acquisition of Citigroup’s consumer banking business in 4 ASEAN countries to fulfil customer needs and lifestyle aspirations; (iii) developing new initiatives to target emerging industries such as those related to sustainability and innovation; and (iv) doubling down on productivity efforts by digitalising its processes, enhancing customer experience, deepening employee engagement, and streamlining costs.
  • A Sustainability Advisory Panel (comprising 3 independent industry experts) was set up to advise the Board and Management on UOB’s sustainable strategy, targets, and initiatives was set up, and the first progress report on its net zero commitment made in 2022 was published – Particularly, the bank have achieved reductions in emissions intensities across all 5 sectors (in power, automotive, real estate, construction, and steel).
  • A $500 million investment to build its latest innovation hub in the Punggol Digital District, which will be its “nerve centre” to ideate, develop, and pilot the next generation of digital services, including FinTech and sustainable solutions.
  • On the digital banking front, the bank have unified UOB TMRW app for its retail customers in Singapore, Malaysia, Indonesia, and Thailand. For its corporate customers, it have made UOB Infinity app available in 10 markets across ASEAN and Greater China, as well as enhancing its UOB SME app (launched in Singapore, Malaysia, and Vietnam) to enable businesses to stay on top of their operations by facilitating on-the-go transactions.

Looking Ahead:

  • Mindful of the new challenges and opportunities amid rapid digitalisation and recalibration of global supply chains, the Board will continue to guide the management on sharpening the bank’s capabilities to support 3 key growth drivers: Connectivity, Personalisation, and Sustainability.
  • Macroeconomic environment expected to remain bumpy in the year ahead (with global growth expected to moderate amid weaker consumer demand and tighter monetary policies to control inflation, China’s economic situation expected to remain challenging with growth likely remain soft in 2024, and a further escalation of geopolitical tensions in Eastern Europe and Middle East may drive up energy and food prices, as well as shipping costs worldwide, putting pressure on consumer prices and central banks), the bank’s management continues to remain optimistic about ASEAN’s potential on the back of improved domestic demand and rebounding exports.

Details of UOB’s 82nd Annual General Meeting

When? Thursday, 18 April 2024
Time? 3.00pm
Where? Marina Bay Sands Expo and Convention Centre, Level 4 Roselle and Simpor Ballrooms, 10 Bayfront Avenue, Singapore 018956

The meeting will be held in-person, with no options available for shareholders to attend virtually.

If your shares of the bank are held in a CDP account, your shareholdings will be verified at the venue on the day itself (no pre-registration necessary). However, if your shares are held in a custodian account, you will need to contact your brokerage to appoint you to attend the meeting as a proxy.

In case you’re wondering, I will not be attending the meeting due to other work commitments that I have.

[Update on 15 April 2024: The management have published their responses to substantial and relevant questions submitted by shareholders, and you can find them here.]

Closing Thoughts

To round up, FY2023 has been a very good year for UOB – helped by a high interest rate environment, its net interest income continued to record a strong growth, contributing to its net profit reaching a new high.

Looking forward, with the US Federal Reserve signalling 3 interest rate cuts in 2024 during the Federal Open Market Committee (FOMC) meeting last Wednesday (20 March 2024), my opinion is that net interest margin for the bank (not just UOB’s but for the other 2 banks in DBS and OCBC) should see a gradual decline. However, a strong economy could see loan volumes by retail and business customers climbing, potentially offsetting the negative impact caused by a drop in net interest margin. That’s not all, an improving economy can also see credit card spending climb, aiding to further improvements in the bank’s net fee and commissions income.

On top of that, the completion of the integration of Citibank’s consumer banking operations in Thailand by the 1st half of 2024 can further aid UOB’s financial performance in FY2024.

With that, I have come to the end of my sharing on the key highlights in UOB’s latest annual report for FY2023. I hope you have found them useful, and do take note that the opinions expressed above are purely mine, which I’m sharing for educational purposes only. You are strongly advised to do your own due diligence before making 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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