United Overseas Bank Limited

Good morning and welcome to UOB's 3rd Quarter 2022 Results Briefing. I'm Wendy Wan from 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 your question. We would like to remind those in the room with us to 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, Gula and Kelly. Good morning. Thank you for joining us. It is great to see everyone here in this room again. Since we last met, uncertainties continue to cloud the global economy. But Southeast Asia has shown resilience as it is benefiting from the shift from globalization to regionalization. Robust commodity prices and resumptions of economic activities after countries moved from pandemic lockdowns to endemic management. Last month, we launched our brand Refresh. We laid out our sharpened purpose to build the future of ASEAN. We want to build the future of ASEAN for the people and businesses within the region and those connecting with us. We want to be a truly regional bank that grow with our customers and help them achieve their ambitions. To reach this goal, we will double down on three strategic areas. Connectivity, Personalizations and Sustainability. These are recurring themes you will be constantly hearing from us. Our third quarter profit was 34% higher year on year at $1.4 billion. This boosted our ROE to 14% from 10.4% a year earlier. Core business is strong. We robust net interest income. driven by higher margins as we remain selective on loan growth opportunities. Fees continue to be soft with current market sentiment but the decline was more than offset by the net interest uplift. Other non-interest income surge with record high customer related treasury income due to higher demand for hedging solutions. Asset quality is benign with lower total credit costs and MPL. We reversed our one-off real estate MPL classified last quarter after a successful restructuring exercise. Our balance sheet remains strong. We are well positioned to ride through this uncertain period and to see through the integration of Citi's retail business from next quarter. Now, let me give some highlights on our business segment. Wholesale banking performed well. Income up 31%. As we grew our CASA balances and loans steadily over the past year, we achieved higher margin from rate hikes. Our clients are optimistic about Southeast Asia's potential as an alternative production base. For example, the nickel industry in Indonesia and its related upstream and downstream supply network is benefiting from the rapidly growing electric vehicle industry. Our extensive regional footprint, deep local and sector expertise give us a competitive edge in banking this trade and investment flows and enable us to facilitate and capture cross-border connectivity opportunities effectively. Our cross-border income rose 16% year-on-year and now accounts for 29% of our wholesale banking income. This was driven by growth across all major product groups. Our regional cash management platform UOB Infinity has helped our customers manage their businesses more efficiently. Consequently, our CASA balances trended higher and digital transactions jumped 14%. We have been recognized by large Asian corporates as their number one preferred financial institution for cash management services in ASEAN. we will continue to help clients go digital, go green and be future ready. Our retail performance was supported by our balanced business model with diversified revenue drivers. While wealth management fees were lower as clients stay cautious in an uncertain market, but overall AUM held steady. We continue to see net inflows, which more than offset negative market impact. Our AUM saw an increase this quarter, reflecting customer trust in a UOB franchise for wealth management. And our bank insurance sales set a new record in September. Other parts of our retail business saw stable growth. Credit card fees grew steadily with higher billing from spending and travels. Mortgage business held steady despite market slowdown due to rising rates. Our new mortgage sales averaged more than one billion Sing Dollars a month and our market share remained firm. Despite higher interest rates, our portfolio is expected to stay healthy. we are making meaningful progress in growing our franchise across the region. Our award-winning digital platform EOB Tomorrow reached a significant milestone in August achieving 1 million digitally acquired customers and more than two-thirds of these customers are new to bank. This platform will also be key in our serving digitally our incoming city customers across the region. On our city acquisition, we are happy with the progress. The regulators have approved our acquisition in Malaysia and Thailand. We will welcome city customers and staff in these two markets to our fold next Tuesday, 1st November. We are working towards taking over the business in Indonesia and Vietnam next year. The business remains strong and around 90% of city staff have agreed to join us. Next, on sustainability, we want to help customers in their transition journey from both the financing and investing angles. Our sustainable financing portfolio reached S$23 billion today. As a leader in SME segment, we are helping our SME customers jumpstart their sustainability journey. We recently launched the UOB Sustainability Compass, a tool to help SME identify steps that they can take to go green in their businesses. We know that climate action is an urgent task at hand. However, here in Asia, and particularly in our home region of Southeast Asia, socio-economic challenges must also be carefully considered. There must be an orderly and just transition to ensure that lives and livelihoods can continue to improve. At EOB, our promise is to do right by our customers and our stakeholders. As a responsible steward, we have a role to play to help channel the resources needed to the relevant parties on this journey to reach global net-zero. Looking ahead, the global economic outlook remains challenging. While growth in our region was slow, we are not expecting an impending recession in our key markets if there is an orderly foreign exchange and interest rate movements. As a long-term bank, we are no strangers to the up and down of the economic cycles. With our strong balance sheets, diversified revenue drivers and disciplined approach, we are confident to ride through this cycle with our customers. In the next 12 months, rising rates will continue to support our net interest income. We expect to end the year with mid-single digit loan growth, margins above 2%, stable cost-to-income ratio, 20 basis points of credit costs. In closing, I want to thank my colleagues for their dedication and teamwork for this strong set of results. We remain committed to building the future of ASEAN. And we will continue to strive towards being the most preferred bank for both consumers and businesses across our key markets. Thank you. Now I will Turnover to Wi-Fi to elaborate on our finances. Thank you.

Thank you, Yichang. Good morning, everybody. Thanks for joining us today, including those that are dialing in online. I think it has been an exciting quarter for us. That quarter profit reached a high of $1.4 billion. from record net interest income and lower credit costs. This is 26% higher than last quarter and 34% higher than a year ago. For the nine month period this year, profit increased 12% to $3.4 billion. Strong NIM expansion of 28 basis points to 1.95% drove NII to register another quarter of double digit growth, surpassing the $2 billion mark. Loans-related fees moderated from last quarter's high, while wealth fees remained soft as investors continued to be cautious. Customer-related Treasury income continued to remain strong. It surged to a record high from the increased demand for hedging activities. Trading and liquidity management activities also achieved better performance amid the market volatilities. Asset quality stabilized with NPL ratio improving to 1.5%. Total credit cost on loans also improved to 17 basis points. We continue to focus our effort on selective growth. With our loan book growing 1%, quarter on quarter, but 6% year on year. Our capital position remains healthy, with CT1 at 12.8%. I think bearing in mind that this is actually post our interim dividend payout for this quarter. On the business front, retail operating profit benefited from the stronger deposit growth and higher margin. This was partially dampened by the lower wealth fees on the back of cautious market sentiment. We are confident that with the city consumer portfolio adding to our regional franchise next quarter, there will be more opportunities to grow in the retail space. Wholesale did well. and saw double-digit growth led by volume and margin expansion, with loans and investment banking fees at record levels, as well as strong customer-related treasury income. Global market benefited from the market volatility and achieved better trading results. Our wholesale business continues to register strong growth momentum on the back of diverse growth engines. As we have often emphasised, our comprehensive ASEAN footprint, sector specialisation and deepened product capabilities has enabled us to capture the growing cross-border opportunities as economies Open and companies diversify their supply chain. Cross-border income rose 16%, loans-related fees rose 7%, and our global financial institution growth rose 26%. Across the region, our new cash management platform is driving higher digital adoption by our corporate customers with robust growth in transaction volume and cashless payment. For the retail side, we continue to grow our franchise and deepen capabilities in our retail business. We are on track to digitally acquire 500,000 new customers across the region by the end of this year. In Indonesia itself, the UOB Tomorrow registered remarkable customer growth of 2.4 times year-on-year. Ecosystem partnership has been key in scaling our franchise. Today, we have established more than 140 ecosystem partnerships across the region to drive customer acquisition Overseas Bank Limited Notwithstanding the negative market sentiment for the quarter, our wealth AUM showed an increase of 1%, as highlighted by my CEO. Our OMI channel bank assurance solutions continue to be well received by our customers. Bank assurance sales grew 23% in the quarter. In fact, like what Yicheng said, in September, we recorded our highest monthly growth over the 13 years partnership that we have with Prudential. For the quarter, we saw good momentum in ASEAN and Singapore. Singapore showed strong growth from NIM extension and exceptional trading income. Our regional franchise continues to be a key platform for customers to gain market access across as they find cross-border activities and trade flows. Malaysia showed a similar momentum as Singapore. I think margins improved 21 basis points for the quarter and also very good trading income. For the numbers itself, I think as we mentioned earlier, we achieved a record quarter of the $1.4 billion. I will go through the key drivers in the next few slides. Click margins. I think on the back of rising interest rate environment, net interest income registered another quarter of double-digit growth and crossed the $2 billion mark. NIM expanded by a strong 28 basis point to reach 1.95% for the quarter. On a year-on-year basis, NII grew 23%, boosted by NIM uplift and the 6% loans growth volume. For fees, Our nine-month loans fees grew to a new high spurred by trade and investment growth. Credit cards also increased as consumer spending picked up with the reopening of the borders. On the other hand, wealth and fund management fees slowed as investor sentiment turned cautious alongside the market volatility. For the quarter, Loans fees moderated from an exceptional high second quarter, while wealth momentum remained soft. As mentioned by Yi Chong, the decline in fees, especially in the wealth side, is more than compensated by our NII expansion. Customer-related Treasury income rose to a record high this quarter as customers seek hedging opportunities during this time of market volatility. Other trading and investment income also surged on improved performance from both trading and liquidity management activities. Expenses rose in line with income growth, with cost-to-income ratio improving to 42.6% for the quarter. I think if you notice, year-on-year staff costs increased 9%, as we responded to the tight market labour condition, especially in Singapore. Asset quality I think asset quality improved this quarter. I think NPL formation was lower, coupled with better recoveries, especially with that single credit case that Yichang mentioned, and NPL ratio improved to 1.5%. NPA coverage remained stable at 33%. Credit costs also improved by 5 basis points to 17 basis points this quarter, mainly from lower specific provision. In anticipation of the heightened taxation risk, we are maintaining similar levels of general allowance this quarter. We expect credit costs for 2022 this year to close at around 20 basis points. The group total allowances were at $4.9 billion for the quarter, of which $3.2 billion was in general allowances. MPA coverage at 98% or 207% after taking collateral into account and performance loans coverage at 0.9%, I think both remain adequate. We are confident that our general allowances will be sufficient to cushion the anticipated credit losses should it happen from the portfolio. Loans growth momentum sustained well, increasing 1%, quarter-on-quarter, and 6% for the year. I think there was some impact on exchange rate. So if I take a constant exchange rate, year-on-year growth would have been 7%. But more important is our ASEAN region would have grown 7% year-on-year at a constant rate. With rising interest costs in the wholesale market, we maintain our focus on customer deposits as the major source of stable funding. Customer deposits grew steadily at 5% quarter-on-quarter and 6% year-on-year, with fixed deposits being the largest contributor. I think most of you will ask me that question, but with the rise in interest rate, we do notice customer switching from their current account into FDs. However, we do have net positive fund flows as customers reacted favorably to our FD campaign. In fact, 20% of the FDs open were new to bank customers. In addition, we still get a positive carry. I think, as you know, we are competing with the government, right? Singapore Treasury are already closing this quarter, but we still can get short-term yield paper at above 4%, so we are not having a negative carry. Our liquidity and funding positions strengthened this quarter, with LCR at 142% and NSFR at 114%. Despite seeing some volatility in our OCI reserves, our capital position remained resilient with CT1 at 12.8% post the interim dividend payment. I think it's good to note that the mark-to-market losses in the OCI reserves, these are mainly due to our holdings of our statutory reserve, and there is no real credit risk. These losses will be reversed when the holdings mature. With that, I conclude my presentation, and I pass it back to Wendy. Thanks.