11 things to know about UOB Bank before you invest (updated 2019)

United Overseas Bank (UOB) is one of the five largest banking groups in Southeast Asia. Presently, it operates over 500 branches located in Southeast Asia and Greater China. As at 11 June 2019, UOB is valued at S$41.2 billion in market capitalisation. In this article, I’ll bring you an update on UOB’s latest financial results and valuation.

Thus, here are 11 things to know about UOB Bank before you invest:

1. UOB’s loan portfolio has grown by a compound annual growth rate (CAGR) of 11.2% in its loan portfolio over the last 10 years, from S$99.2 billion in 2009 to S$258.6 billion in 2018.

Source: UOB annual reports

This is due to growth in loans disbursed in key segments which include building & construction, housing loans, general commerce, professional & private individuals, and manufacturing during the period.

Key SegmentGross Loan Amount 2009 (S$ billions)Gross Loan Amount 2018 (S$ billions)CAGR
Building & Construction 11.7 63.1 20.6%
Housing Loans27.4 68.4 10.7%
General Commerce 12.8 32.9 11.1%
Professionals & Private Individuals13.329.3 9.0%
Manufacturing8.8 21.1 10.2%

2. Net interest income (NII) has grown at a CAGR of 6.02%, from S$3.67 billion in 2009 to S$6.22 billion in 2018.

Source: UOB annual reports

NII growth lagged loan portfolio growth as UOB has recorded a steady decline in its net interest margins (NIM) during the period, from 2.37% in 2009 to 1.82% in 2018.

Source: UOB annual reports

3. Non-interest income has grown at a CAGR of 5.88% over the last 10 years, from S$1.73 billion in 2009 to S$2.90 billion in 2018. This is mainly driven by growth in net fees and commission from credit cards, fund and wealth management, loan and trade-related services, and a range of service fees. In 2018, UOB recorded a dip in non-interest income due to a dip in trading income.

Source: UOB annual reports

4. Total income has grown by a CAGR of 5.98% over the last 10 years, from S$5.41 billion in 2009 to S$9.12 billion in 2018. This is directly attributed to growth in both net interest and non-interest income during the period.

Source: UOB annual reports

5. Shareholders’ earnings have grown at a CAGR of 8.63% over the last 10 years, from S$1.90 billion in 2009 to S$4.01 billion in 2018. Besides growth in total income, UOB has maintained a stable cost-to-revenue ratio of 40-45% and a low non-performing loan ratio of 1-2% throughout the period. UOB has a 10-Year return on equity average of 10.47%.

Source: UOB annual reports

6. As of 31 March 2019, UOB has a total capital ratio (TCR) of 17.0%, above the 12.5% minimum set by the Monetary Authority of Singapore. It has an all-currency liquidity coverage ratio (LCR) of 146% and a net stable funding ratio (NSFR) of 109%. Both ratios are also well above their minimum requirements. UOB has Aa1, AA-, and AA- credit ratings by Moody’s, Standard & Poor’s, and Fitch respectively.

7. Moving forward, UOB intends to forge partnerships to expand distribution of its banking products to customers. This includes partnerships in three key segments:

  • Live. UOB Home Solution offers prospective homebuyers online tools like an affordability calculator, instant valuation, and instant home loan approval to speed up their decisions on home purchases and loan applications. The bank has also forged partnerships with the five largest real estate agencies in Singapore and saw three times increment for online home loan applications in 2018.
  • Commute. Presently, UOB is the preferred banking partner of ride-hailing leader, Grab, and is the only bank appointed to process debit and credit payments for the Land Transport Authority (LTA) and Transitlink. In addition, UOB has also partnerships with 12 car dealerships including Cycle & Carriage Singapore, Motor Image Enterprises, Inchcape Singapore, Tan Chong Motor Sales, and Trans Eurokar where the bank provides digitised and instant car loan approval to car buyers in Singapore. Currently, more than 50% of UOB’s car loan applications are done online.
  • Play. This involves partnerships to boost transactions made via UOB credit cards like the KrisFlyer UOB Credit Card and Savings Account which allows cardholders to earn miles on every dollar they save and spend. UOB has also launched online guides like the Dining Advisor and the Travel Insider to promote the use of UOB cards.

8. In 2018, UOB made 42.6% of its operating profit from overseas markets. Here’s a breakdown of operating profit according to geographical markets:

Geographical MarketOperating Profit (S$ millions)Percentage of Total Operating Profit
Greater China4829.4%
Total Operating Profit5,113100.0%

In 2018, UOB incorporated UOB Vietnam, a fully-owned subsidiary to further expand its presence in Southeast Asia.

9. P/E ratio: UOB recorded S$2.34 in earnings per share in 2018. Therefore, based on its current share price of $24.53 (as of 11 June 2019), its current P/E ratio is 10.48, which is below its 10-year average of 11.95.

10. P/B ratio: As of 31 March 2019, UOB had net assets of S$22.13 per share. Hence, it has a current P/B ratio of 1.11, below its 10-year average of 1.20. 

11. Dividend yield: UOB paid S$1.00 in ordinary dividends per share (DPS) in 2018, an increase from S$0.80 in ordinary DPS in 2017.

Source: UOB annual reports

Based on its current share price, UOB is offering an annual dividend yield of 4.08%, which is above its 10-year average of 3.14%.

The fifth perspective

UOB has delivered steady growth in total income, shareholders’ earnings, and dividends over the last 10 years.

At current stock prices, UOB is trading below its historical P/E and P/B averages while offering a yield of around 4%. Along with DBS and OCBC, the three Singapore banks are currently offering above-average yields due to the recent dip in share prices.

Ian Tai

Financial content machine. Dividend investor. Produced 450+ financial articles featured on KCLau.com in Malaysia and The Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular host and presenter of a weekly financial webinar with KCLau.com. Co-founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

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