United Overseas Bank (UOB) is a leading bank in Asia with a global network of over 500 branches and offices in 19 countries and territories in Asia-Pacific, Europe, and North America. As of 31 December 2021, UOB has total assets of S$459 billion. In terms of total assets, the bank is the third largest in Southeast Asia.
UOB currently offers commercial and corporate banking services, personal services, private banking, and asset management services, as well as corporate finance, venture capital, investment, and insurance.
I attended UOB’s 2022 AGM to learn more about how the pandemic impacted UOB’s performance, and the management’s outlook amid a rising interest rate environment. Here are eight things I learned from the 2022 UOB AGM.
1. Net profit after tax increased 40% year-on-year to S$4.1 billion in FY2021 from S$2.9 billion in FY2020. This was driven by stronger income growth and lower credit allowance as Singapore and regional economies gradually recovered. Correspondingly, return on equity increased 2.8 percentage points to 10.2% for FY2021.
2. Net interest income increased 6% year-on-year to S$6.4 billion in FY2021 from S$6.0 billion in FY2020. This is led by strong loan growth of 10%. With proactive balance sheet management, UOB’s net interest margin was kept stable at 1.56% during the low interest rate environment.
3. The board declared a final dividend of 60 cents per ordinary share. This will bring the total dividend for FY2021 to $1.20 per ordinary share, representing a dividend payout ratio of about 49%. UOB’s total annualised shareholder return from 2017 to 2021 is 9.5%, outperforming the stock market average of 5.1%.
4. UOB CEO Wee Ee Cheong mentioned that UOB has the most extensive ASEAN network among other Singapore banks. UOB established a Foreign Direct Investment (FDI) Advisory Unit to help companies set up regional operations in Asia. These professionals are equipped with deep market knowledge and sector expertise. Since 2011, the FDI Advisory Unit has supported regional expansion of more than 3,500 companies.
5. UOB CEO Wee Ee Cheong mentioned that UOB is looking towards an omni-channel strategy to scale its presence. Its digital platform, UOB TMRW, has been named the Best Digital Bank for Southeast Asia by The Digital Banker for two consecutive years. The app has acquired nearly 800,000 customers digitally since 2018.
6. The CEO expects higher inflation with some growth in the near term, but not stagflation. Although there are geopolitical tensions and concerns of inflation, interest rates are set to rise which UOB will be a beneficiary of. The CEO added that growth will be uneven, with countries like Malaysia and Indonesia benefitting from the rise of cost in commodities.
7. A shareholder asked about UOB’s long-term loan growth and ROE targets. CFO Lee Wai Fai shared that UOB is looking for high single-digit to low double-digit loan growth. UOB’s current ROE is at 10%. As margins rise, UOB might achieve 12% in the medium term, and the inclusion of the Citibank acquisition potentially adding another 1%. This totals a ROE of around 13%, which UOB aims to attain by 2026.
8. A shareholder asked about UOB’s plans to educate the older generation of customers who are not as technologically savvy. UOB Head of Group Channels & Digitalisation Janet Young mentioned that UOB currently dedicates the first opening hour at its bank branches to older customers. This is to make sure that these customers are well taken care of and can access the suite of banking services that UOB provides.
The fifth perspective
UOB has produced consistent growth in earnings and dividends over the years, except for 2020 due to the pandemic. UOB stands to benefit from the rising interest rate environment, and its management is optimistic on the bank’s outlook. At a share price of $28.59 (as of 13 May 2022), UOB’s price-to-book ratio is 1.19, which its slightly higher than its 10-year average of 1.16. UOB looks fairly valued at the moment.
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