United Overseas Bank Limited

Hello and welcome to UOB's full year 2021 results briefing. This morning, we have Mr Wee Cheong, UOB Deputy Chairman and CEO, and Mr Lee Wai Fai, our CFO, to present the results. A few house rules before we start. Please keep your questions till after the presentations are done. During the Q&A session, if you would like to ask a question, please raise your hand and wait for my cue. You can then use the mic to speak. For those dialing in via Microsoft Teams, please use the raise hand function to indicate that you would like to ask a question. You can find the icon at the top of the frame, third button from the left. Please wait for my cue and turn on your camera before asking your question. We would like to remind those in the room with us to keep your mask on at all times and to keep a safe distance with one another. Please also put your mobile phones to silent. For those of you on Microsoft Teams, please put yourself on mute for now. Without further ado, I will now pass the time to our CEO. Mr. Wee, please.

Thank you. Good morning and thank you for joining us. We hope everyone is staying safe. and healthy. As we enter the third year of the global pandemic, the operating environment is stabilising. We believe the worst is behind us. In Singapore, we see market recovery and improving consumer sentiment. In Southeast Asia, green shots of recovery are strengthening. Last year, global FDI surpassed pre-COVID levels, especially for flows into ASEAN. Our decision to acquire Citigroup's consumer business in Indonesia Malaysia, Thailand and Vietnam, affirms our confidence in the long-term potential of ASEAN. This deal is a strategic feat at the right time. We are buying a quality franchise, four target markets at one go. with a complementary base of customers, people and capabilities. A powerful combination that will accelerate our growth ambitions. We are confident that this deal will further strengthen and deepen our regional franchise. We are glad that we are in a position of strength to do this deal. Our strong balance sheets allow us to seize this opportunity and to put our capital to good use. We will have revenue synergies from scale benefits. Now let me share our full year's results with a pick up in customer activities. the bank recorded a healthy performance in 2021 with broad-based growth. Net profit after tax increased by 40% to $4.1 billion. Loans registered double-digit growth of 10%. NIEM was stable at 1.56%. we achieved record fees up 21% mainly from wealth and loan related activities. On the bank of discipline spending, our CIR improved to 44.1%. Our portfolio is resilient with stable asset quality and our total credit cost declined to 20 basis points. We are grateful to shareholders for their support in the past year. And we are pleased to share that the Board has recommended a final dividend of $0.60 per ordinary shares. Now, together with the interim dividend of $0.60 per ordinary share, the total dividend for fiscal year 2021 will be $0.120 per ordinary shares. represents a payout ratio of approximately 49%. Let me now share how we are progressing in our business strategies. My CFO Wi-Fi will go through later the detailed financials. Last year, group wholesale banking income rose 8% on the back of continued diversification across geographical sectors and products. This strong performance is powered by our customer franchise and regional connectivity. We saw continued loan growth from large corporates, top global property funds and financial sponsors in Singapore, Hong Kong and developed markets. Free income from loan and investment banking deals also registered strong growth. The business momentum is expected to continue as economies recover. We also see refinancing opportunities as clients transition to sustainable financing. Winning more cash and trade client mandates has increased our transaction banking revenue and we will continue to deepen client engagement to capture the entire working capital cycle. Cross-border revenue grew 10% and now accounts for about a third of wholesale banking revenue. We recently increased our capital commitment to China and we see upside potential from trade and investment corridors between ASEAN and China. ASEAN plays a prominent role in global value change and will continue to attract manufacturing FDI. Since 2011, our FDI team helped more than 3,500 companies connect across Asia. In the last three years, the companies we have supported are projected to invest about S$34 billion and to generate nearly 160,000 jobs. And we will continue to diversify our revenue screen. Growth outside Singapore was 10%, while non-loan income rose 7%. During the year, we continue to meet our clients' needs through progressive solutions. For example, in broadening our digital payment and trade capabilities, we continue the rollout of UOB Infinity across the region and partner IMDA to digitalise cross-border trade flows between Singapore and China. and Bloomberg recently affirmed our leadership position in capital markets across Singapore and ASEAN. Our retail strategy remains on track. We continue to tap the rising affluence in Southeast Asia by acquiring customers using our unified digital banking platform, EOB Tomorrow, and serving them through our omnichannel approach as their needs grow. The city acquisition subject to regulatory approval is a game-changer. With this transformational deal, we will accelerate our ambition by five years and become one of the largest retail banks in the region. With an expanded customer franchise, more touchpoints and partnerships, a greater market share, and a stronger team to serve our customers. Our focus in the coming months is to work closely with the city team on integration and to fully realise synergies from the acquisitions. With our regional infrastructure and standardised systems, we are confident of executing this deal across the foreign market in a phased approach. We have established work streams for the integration and had a joint town hall with the teams earlier this week. Beyond building scale, we will continue to deepen our digital capabilities. Our award-winning of UOB Tomorrow positions positioned us well ahead of digital banks emerging across the region. Speed to market is key. Since 2018, we have acquired nearly 800,000 customers digitally across our key markets with accelerated momentum last year. With the city acquisitions, we expect the numbers to ramp up UOB Tomorrow is being rolled out progressively across the region. It will help us to build scale and reduce cost to serve. Another key pillar in our retail strategy is to serve the growing affluent client base in this region. We set up a private well group last year to better serve our high network clients with our holistic advisory capabilities and one bank approach. We will continue to beef up our team and capabilities. In 2021, we make substantial progress in our sustainability journey. and received industrial recognitions for our efforts. We exceeded our 2023 target of $15 billion of sustainable financing and two years ahead in advance. Our total AUM in ESG-focused investment grew to S$9 billion. In terms of impact, we continue to support our clients' efforts to reduce greenhouse gas emissions and in addition, we became carbon neutral for our own footprint through continued focus on energy efficiency and the purchase of renewable energy and carbon credits. Looking ahead, we aim to achieve New sustainable financing target of $30 billion by 2025 and enhanced disclosure in line with global best-in-class standards. We will continue to explore pathways to support the decarbonisation of our finance emissions and support our customers in the transition to a lower carbon economy. For this year, our guidance is for mid-to-high single-digit loan growth, backed by strong pipeline in corporate and institutional loans and mortgages. For margins, we expect 4-5 basis points upside a rate hike. Double-digit growth in non-interest income driven by loan-related wealth and credit card fees. Stable cost-to-income ratio excluding city-related integration costs. And credit costs to normalise back to about 25 basis points on the back of our resilient portfolio. In summary, We are optimistic of ASEAN long-term potential and are well-positioned to capture opportunities arising. We stand ready to support our customers with our strong fundamentals. We will continue to invest and to deepen capabilities in connectivity, digital innovation and sustainability. areas of growth in Asia for years to come. Subject to regulatory approval, we look forward to integrating Citi's quality portfolio and welcoming its team and to creating value for our enlarged base of customers, employees and other stakeholders. The acquired business together with our regional consumer franchise will form a powerful combination that will scale up UOB's business and advance our position as a leading regional bank. I also want to take this opportunity to thank all my colleagues for their teamwork and dedication. Thank you too for your support. I will now hand over to Wi-Fi to elaborate on our financial. Thank you.

Thank you, Lee Cheong, and good morning once again to everyone for joining us today. Our full year's profit increased 40% to $4.1 billion. Despite a weaker trading and investment income, our operating profit grew 10% to $5.5 billion. This good performance is the result of a healthy loans growth in business activities and consumer spending as the operating environment and customer sentiment improved. Fourth quarter profit was 3% lower than the previous quarter at $1 billion, largely due to a lower trading and investment income. Quarter and quarter, NII was up 5% on steady loans growth and improvement in margin. Fees income was stable, while trading and investment income declined due to a softer market sentiment towards year-end. Asset quality remains resilient, with NPR ratio at 1.6%. Total credit cost on loans is to 12 basis points this quarter, due to write-back of general allowances, as we have better clarity and confidence of the recovery path. Our capital and liquidity position remains strong, with CT1 at 13.5% and NSFR at 115%, respectively. retail did especially well as fees and customers AUM soared to record level, coupled with pickup in credit and card activities, which cushioned the impact from margin compression. Wholesale saw robust growth led by strong demand for financing advice, structuring and funding opportunity from large corporate and institutional clients. Global market operating profit was lower due to higher gains from bond sales last year. Wholesale, like Yichang said, continued to register strong performance driven by diverse growth engines. Our comprehensive ASEAN footprint, sector specialization, and deepened product capabilities has enabled us to capture the growing cross-border opportunities. Cross-border income grew 10% and now accounts for 30% of our wholesale banking income. loans and trade-related fees rose 28% as customers increasingly leveraged our sector-specific insights and solutions. Our Global Financial Institution Group registered 21% income growth in banking property funds and financial sponsors, serving them with our strong structuring capabilities. The acceleration of digital adoption by our corporate customers had also facilitated increased transaction volumes. we continue to build scale and deepen capabilities in our retail business. Prior to our recent acquisition, we had initially acquired around 800,000 customers in the region since the fourth quarter in 2018. In fact, the pace of new customer acquisition has increased significantly with close to 300,000 customers onboarded in 2021. The pace of our customer growth will be accelerated with UOB tomorrow alongside our regional ecosystem partners and further augmented by the city acquisition. Our recent introduction of UOB Tomorrow was well received by customers with the app receiving the highest rating among key banking apps in Singapore. Our rewards program on UOB Tomorrow, where customers can view, track, and Redeem Rewards registered a 44% growth in number of users. As a trusted bank of choice of our clients, our Assets AUM increased 4% year-on-year to a new high of $139 billion. Total card billings in Singapore rose 17%, underscoring the recovery in the consumer sentiment. On the back of economic recovery, growth is similarly seen across our key markets in Singapore, North Asia and ASEAN. The developed market saw significant improvement in 2021 as our customers invested into these countries, giving rise to funding opportunities. While the recovery in ASEAN was slower, we managed to still show a 2% year-on-year increase as there are still pockets of economic activities. I have summarized the overall performance earlier, but just to recap the key highlights. Strong business flow helped grow total income by 7%, while disciplined cost measure contained cost to 3%. This resulted in a positive jaw, where operating profit grew 10% for the year. I will now go through some of the key drivers in the next few slides. Interest rate. While interest rates stayed low through 2021, we managed NII growth by 6% to $6.4 billion due to two key reasons. First, in a year where market was very competitive for good credits and mortgages, we managed to grow loans 10% year-on-year. Second, we managed to hold NIMS stable through proactive balance sheet management. If the interest rate expected to be higher in 2022, interest income is similarly expected to grow. With the economic recovery and strong customer franchise, 2021 fees income is the highest ever seen at $2.4 billion, a 21% increase over the previous year. Wealth management fees reached a record level with returning investor confidence. It achieved a double-digit growth of 16% to $823 million in 2021. Wealth sales increased. was seen across most investment products, especially in investments and bank assurance. Customer continued to entrust us to help grow their investments resulting in the 4% AUM growth. Corporate fees also has seen very good performance in 2021. Economic Recovery gave a boost to revive trade and investment transactions. We are able to capture these flows as our past investments to enhance product capabilities and to pride customers with solutioning spending across industry and countries start to show results. Loans and trade-related fees grow to record levels in 2021, surpassing the $1 billion mark. Customer-related treasury income also reached a new high year-on-year, with a growth of 10%. On the other hand, non-customer trading income decreased year-on-year on the exceptional high gains on sale of bonds last year. Expenses Expenses grew 3% year-on-year as we continued to invest into building for the future. As a result of new investments coming on stream, technology-related costs rose by 10% over the last year. With the investment in our people over the years, together with the addition of the Citibank talent, we now have the confidence to face the challenges that has disrupted the industry. Our overall exact loans portfolio remains resilient. NPA formation was higher this quarter from a few secured corporate accounts. These were well within management expectation and we have adequately set aside provisions for them last year. NPL ratio rose marginally to 1.6%. We know that there are ongoing concerns on some countries that have extended their relief programs. We have accessed the residual risk of this portfolio and believe that the impact on credit costs or NPAs will not be significant. Our general allowance set aside is more than adequate to absorb the losses should they materialize. Total credit costs ease to 20 basis points for the year as credit outlook stabilizes. We expect credit costs for 2022 to stay within the 20-25 basis point guidance range. The Group Total Allowances were at $4.9 billion for the year, of which $3.3 billion was general allowances. NPA coverage at 96%, or 239% after taking collector into account, and more important, the performing loans coverage at 1%, they all remain strong. With the strong reserve coverage, we are confident that our general allowance is sufficient to see us through this downturn. I think loans momentum sustained well. We grew 2% for the quarter and 10% for the year. Growth was mainly from Singapore, North Asia and the Western world, as economic and investment opportunities pick up for our corporate and institutional customers. The strong deposit growth from last year carried into 2021. We continue to see strong liquidity flows, in particular in Singapore. As a result, CASA to deposit ratio grew to 56.2% at the end of last year. Our liquidity position remains strong, with the quarter LCRs at 133% and NSFR at 116%, both well above the minimum regulatory requirements. We ended the year with CT1 ratio healthy at 13.5%. With a solid balance sheet and adequate general allowances, we are comfortable with our current CT1 position. We had mentioned previously that on a pro forma basis, the Citibank acquisition will bring our CT1 down to 12.8%, a level we are actually very comfortable with. Like Yishong said, the board declared a final dividend of $0.60 per ordinary share in appreciation of the support from our shareholders. I think with that, I conclude my presentation and I pass it back to the moderator.