United Overseas Bank Limited

Good morning, and welcome to UOB's first half 2022 results briefing. I'm Wendy Wan from UOB's Group Strategic Communications and Brand, and I will be your MC for today. This morning, we have Mr. Wee E. Chong, 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. 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 the question. We would like to remind those in the room with us to keep your mask on at all times. 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.

Good morning. Thank you for joining us. Great to see every one of you here in person again. I believe our result announced and I saw some of the headline numbers. I believe you are quite familiar. But let me just take this opportunity to highlight to some of you. And since we last spoke, there is much talk about rising inflation, aggressive rate hikes and recession risk. This backdrop has two divergent implications on banks. On one hand, increasing rates will boost our interest income. On the other hand, higher rates may weight on overall business and credit costs as the economy slows. We are confident that with our strong balance sheets, diversified revenue drivers and disciplined approach, we can navigate this environment and support our customers. Our first half profit came in at $2 billion, stable year-on-year. Our second quarter profit of $1.1 billion was 11% higher year-on-year. Core business is strong, driven by higher margins, healthy loan growth, and active balance sheet management. We achieve record fees related to loans, trades, and credit cards. Asset quality is resilient with total credit costs well within expectations. Our balance sheet remains strong. Given our strong earnings and capital position, the Board has recommended an interim dividend of $0.60 per shares, a payout ratio of 50%. Now, let me give you some highlights on business segments. Wholesale banking did well, income up 16% year-on-year, backed by quality loan growth, Higher margins Record trade and investment banking loan free Our diversified footprint Client base and deep expertise allow us to capture business flows as borders reopen and trade and investment activities pick up Our AA rating coupled with strong transaction banking capabilities have resulted in higher CASA balances and digital transaction volume. We continue to help clients go digital and prepare for the future, working closely with government agencies on various initiatives. Being the leading financier to the bunker industry, for example, we are actively helping clients improve operational efficiency and control to the same trade deck platform. Our retail performance, the income came down 3% year-on-year, was supported by diversified revenue drivers. On one hand, we saw lower wealth management fees as investors stay cautious in an uncertain market. we continue to take a risk-first approach with our customers. Despite market connection, our overall AUM was stable, still maintained at $138 billion, except June this year, reflecting clients' continued confidence and trust in us. On the other hand, credit card fees rebounded to a new high, benefiting from higher consumer spending as COVID restrictions are relaxed. Mortgage businesses also grew steadily with strong pipeline from new mortgage sales. We are making meaningful progress in scaling up across the region. For our digital platform, EOB Tomorrow, We see strong growth momentum. We have acquired 1 million customers since launch in 2019 and expect to acquire half a million customers this year and about 70% are new to bank. UOB Tomorrow is ranked number one on App Store, number two in MPS with a wide merchant base offering choices for customers. We have 7,000 merchant and 13,000 touchpoint. Now on our city acquisitions, we are happy with the progress. Business remains resilient. We are targeting legal closing for Thailand and Malaysia by end of this year. Vietnam by first quarter and Indonesia by fourth quarter next year. Citibank staff given us a strong vote of confidence. 90% of the staff in Thailand, Malaysia and Vietnam have agreed to join us. In Indonesia, 75% of the leadership team will remain on board. Next, on sustainability. We are making good progress and building our sectorial pathways towards Net Zero. Earlier this month, we issued our first sustainability bond impact report, listing out tangible outcomes from financing green and social projects. Our sustainable financing portfolio reached $21 billion to date, of which $2 billion was to SME customers. As a leader in the SME segment, we continue to support SMEs in their ESG efforts. We are working closely with the government and industry on various initiatives. For example, we launched a new program called Green Tech Accelerator to help start up commercialized green solutions for SMEs in areas such as carbon management and reporting, energy efficiency and zero waste supply chain. Looking ahead, they are differing views on how much the economy will slow as the world fight inflation. Now at UOB, our base case is we do not expect a recession in our key markets. though growth may slow. In the next 12 to 18 months, we will benefit from rising rates through higher net interest income. Overall, we expect mid-single digit loan growth, low single-digit fee growth, stable cost-to-income ratio of around 45%, and 25 basis points of credit costs. I want to thank my colleagues for their dedication and teamwork for this good set of results. As a team, we are here for our customers, fellow colleagues and stakeholders in these uncertain times. We are committed to fulfill our purpose of helping to build by supporting the businesses and people and communities there. Thank you. Now I will turn over the Wi-Fi to elaborate on our financials.

Thank you, Yixiang. And once again, good morning again. Actually, it's quite nice to meet physically again after so many years. Okay. I think since we last spoke, markets continue to be uncertain, with consumer confidence receding, business sentiment winning, and inflationary pressure rising. In response, like Yicheng said, various countries have been rising interest rates. Amid these macroeconomic challenges, the group sustains stable first-half profit of above $2 billion, supported by NIM expansion and lower credit costs. The second quarter profit of $1.1 billion showed strong recovery of 23% from the previous quarter, as spurred by strong net interest income with trading and investment income normalizing. Against the same quarter last year, profit was 11% up. Strong knee momentum drove a robust net interest income growth. On the fees front, we are witnessing record loans-related and card-related fees. However, wealth fees were softer as customer sentiment were more subdued. Businesses are also taking a more cautious stand by hedging their forward positions, leading to higher customer-related treasury income. With interest rates expected to continue to increase, we focus our effort to grow selectively. Hence, our loans will grow 1% Q1Q by 8% year-on-year. Asset quality remained resilient with NPR ratio stable at 1.7%. Total credit cost on loans was stable at 22 basis point. Our capital and liquidity position remained healthy with CT1 at 13.1% and NSFR at 111% respectively. From the business front, retail operations Operating profit was lower as wealth management activities slowed down on the back of the cautious market sentiment. This was partially cushioned by sustained deposit growth and higher margin. We are confident that with the city consumer portfolio coming in, it will further fortify our regional franchise to capture more opportunities when customer confidence resumes. Wholesale saw double-digit growth, led by broad-based growth drivers. margins has improved with loans and investment banking fees at record levels. Global market, on the other hand, benefited from market volatility and achieved better trading results. Our wholesale business continued to register strong growth momentum on the back of diverse engine growth. Our comprehensive ASEAN footprint, sector specialization, and deepened product capabilities has enabled us to capture the growing cross-border opportunities as economies reopened. Cross-border income grew 13% and now accounts for 29% of our wholesale banking income. Loans-related fees increased 8% to a record high in the first half as customers increasingly tapped on our sector-specific insights and solutions. Our global financial institution income rose 25% as we banked property funds and financial sponsors and meet their needs with our strong structuring capabilities. Across the region, we see an acceleration of digital adoption by our corporate customers, with robust growth in transaction volumes and cashless payments. For the consumer, we continue to build, scale and deepen capabilities in our retail business. Like Yicheng mentioned, we are on track to digitally acquire another 500,000 new customers across the region by the end of the year. We have also accumulated 3 billion deposits from our digitally acquired customers. Ecosystem partnership has been key to our franchise growth. Today, we have established more than 80 ecosystem partnerships across the region to drive customer acquisition and loyalty. 27% of our digitally acquired customers were successful partnership referrers. Despite market volatility, our asset under management increased 1% year-on-year to $138 billion. Our digital home solution was well positioned to serve customer needs in the buoyant property market. We achieved more than $9 billion of new mortgage sales in Singapore and across the region. Growth is seen across our key markets in Singapore and North Asia. As our customers venture across the region to seek trade and investment opportunities, we offer one of the best platforms in the region. As a result, our overseas contributions stayed strong at 45%, where we continue to support real capital and trade flows of our customers. I think as I mentioned earlier, our customer franchise remains strong with higher net interest income, stable fees and expenses. Net profit for the quarter grew 22% and 11% year-on-year. I think asset quality and credit costs are stable. Let me go through the details. Net interest income increased 11% quarter-on-quarter. This is powered by the nine basis point lift in NIM for the quarter to 1.67% on the back of rising interest rate. Loans growth was seen across consumer mortgages, corporate and the financial institution group. With further rate hikes expected in the second half of this year, we expect that the net interest income to continue expanding. Total fees was largely flat at $567 million. Loans-related fees hit a new record high, recording 4% quarter-on-quarter growth as we supported customers' need for trade and investment opportunities as economic activities level increased. credit card fees also reached a record level with card spending picking up as border reopened and travel resumes. On the other hand, wealth management and fund management fees took a dip as market sentiment continued cautious along geopolitical tensions and recession concerns. However, these dips were more than compensated by a margin expansion leading to a growth in total income. Year-on-year, customer-related treasury income rose 9%, with more customers looking to hedge business risk. Other trading and investment income rebounded to a more normalized level this quarter. Our costs were well under control. Cost-to-income ratio for the quarter improved to 43.8% as income picked up. We are managing our staff costs as we respond to the higher tight labour market conditions, especially in Singapore. The good news is that our prior investments into paper and systems are starting to bear fruit as evidenced by the improving fees and customer flow income. Overall, our asset quality of our loans portfolio remains resilient. NPL formation was higher this quarter, due mainly to a single corporate account. This led to NPR ratios being slightly higher at 1.7%. As country relief programs tapered off, the residual risk of this portfolio will reduce over the next few quarters. While the credit outlook remains uncertain, we believe that the credit costs will be at a manageable level. Total credit costs for the quarter was at 22 basis points. mainly from the specific allowance from the account mentioned earlier. We do not see any systemic weakness in our portfolio. Considering heightened inflationary pressures and recovery slowdown, we are taking a conservative stance on allowance and adding a modest amount to the general allowance this quarter. We expect credit costs for 2022 to maintain at around 25 basis points. The group total allowances were at $4.9 billion for the quarter of which $3.3 billion was general allowances. NPA coverage at 91% or 185% after taking collateral into account and performing loans coverage at 0.9%. I think they all remain adequate. We are confident that our general allowances will be sufficient to absorb anticipated credit losses from our portfolio should it weaken. Loans growth momentum sustained well, increasing 8% year-on-year across all our major footprints as economic activities resumed. While we have been more cautious this quarter in view of the uncertainties in the market, we remain committed to support our customers in their pursuit of business needs and trading opportunities. Our liquidity Position remains healthy with the quarterly LCR at 141 and NSFR at 111. They are well above regulatory requirements. On the capital front, we ended the capital with a healthy CT1 at 13.1%. With a comfortable capital and liquidity position with adequate allowances, the Board declared an interim dividend of $0.60 per share in appreciation of the support from our shareholders. I think this translates to a payout ratio of 50%. I think with that, I conclude my presentation. I'll pass it back to Wendy.