United Overseas Bank Limited

Good morning, and welcome to UOB's first quarter 2023 results briefing. I'm Wendy Wan from the Group Strategic Communications team, and I will be your emcee 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 all your questions till after the presentations are done. 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. Thank you for joining us today. We had a strong start to the year. Our core net profit for the quarter grew to a record $1.6 billion, up 74% year-on-year. Our diversified engines across the region in retail and wholesale businesses have done well. Core ROE rose to 14.9%. Net interest income was up, boosted by higher margins. Other non-interest income also surged, with record high trading and investment income offsetting softer fee income. Core Cost to Income ratio improved to 40.9%, as we stayed disciplined. Asset quality was resilient, with credit costs within expectations. there have been pockets of banking instabilities in the US and Europe. This created some volatility in global financial markets and added to concerns over the global growth outlook. The liquidity and stability of banks came under the spotlight. UOB is a safe and trusted bank with strong AA ratings. as a prudent long-term player with strong balance sheet is important to us so that we can continue to support our customers through market cycles. On the back of robust earnings, we took the opportunity to further strengthen our balance sheets. Our CET1 improved to 14% and our liquidity profile is well above Regulatory Minimum. Now, let me share some highlights on our core business segments. Group Retail performed well, supported by a balanced business model. A bright spot here is Wealth Management. Wealth Management fees recover strongly, hitting the highest levels in four quarters and are expected to increase as market sentiment improved. AUM grew 14% year-on-year, or $6 billion this quarter, almost all from net new money. Credit card fees almost doubled, 93% year-on-year, due to contributions from the city portfolio and significant pickup in consumer spending. As we aim to shore up stable funding, our retail deposit base grew 15% year-on-year. In uncertain times, customers sit a safe harbor, or you can call it flight to quality. We have received increased customer inquiries and inflows across both our wholesale and retail businesses. Now, on the progress of our city deal. After Malaysia and Thailand, we completed the acquisition in Vietnam in March. We target to close in Indonesia later this year. We are on track to achieve our projected revenue uplift of around $1 billion from four markets for the full year. Our customer base continues to expand from last quarter. As we scale up our regional franchise, we continue to invest in capabilities and to forge partnerships. A case in point in our recent tie-up with Lazada, which spans retail and wholesale segments. We will work with our e-commerce partners to offer banking solutions for our combined customer base in five key Southeast Asian markets. Our wholesale business remains strong. Our loan portfolios saw steady new loans draw down, which were offset by repayments. Meanwhile, our regional subsidiaries' loan books are growing well. China reopening could offset some of the global headwinds in the second half of this year. our margin remains stable with asset repricing mitigating higher funding costs. Our global markets business grew strongly, with customer flow income rising 25% year-on-year in Q1 2023. Over the past 12 months, customer flows account more than 60% of our trading and investment income. We continue to boost our capabilities to capture trade and investment flow. We are ramping up our cash management business. Revenue from our new cash management business mandate today almost doubled compared with the same period last year. It actually grew 97%. Average wholesale CASA balance has surpassed pre-COVID levels. up 62% compared to 2019. Similarly, trade income was up 19% from pre-COVID levels. Our aim is to become the number one cross-border trade bank for ASEAN. As a result of our sustained efforts, transaction banking income has now grown to account for half of total wholesale banking income. We continue to see upside in our connectivity business. Cross-border income grew 19% year-on-year. And the number of suppliers and distributors in our financial supply chain management rose 30% year-on-year. Geopolitical tensions and risk diversifications are driving supply chain shifts. As production hub for the East and West across industries, ASEAN is benefiting. And UOB is gaining new businesses, working with manufacturers coming to this part of the world. Our FDI advisory team has facilitated higher investment flow into this region, up 6.4% for first quarter. from businesses in sectors such as logistics, electric vehicles, infrastructure, renewable energy, biotech and advanced manufacturing. Meanwhile, our sustainability will continue to work closely with clients on their transition. We signed an MOU with JTC last week to scale the adoption of green solutions among Singapore businesses. Looking ahead, the operating environment remains uncertain. However, we still expect to see growth in Asia. There are opportunities in this region where we have extensive integrated network. China's reopening and recovery will benefit our region. We expect trade and investment flows to improve in the second half of this year. For this year, guidance remains largely unchanged. We are anticipating low to mid single-digit loan growth with a focus on high-quality customers. Margin to hold up at current levels. Double-digit fee growth from a low base. Costs to remain well-managed. Credit costs at 20 to 25 business pounds. With our strong balance sheets, we are committed to riding through market cycles with our customers and supporting them in ceasing opportunities in our part of the world. And we are confident that our diversified franchise will help us deliver balanced and stable growth. Overseas Bank Limited

net profit would be $1.5 billion. Net interest income eased this quarter due to a shorter day count as well as lower net interest margin. Neem moderated to 2.14%, partly from the liquidity surplus which we have built and partly due to the increasing cost of funding. Fees income registered a double-digit growth of 14%, led by the recovery of the wealth fees on the back of improved Loans fees rebounded from last quarter's low. Card fees held up despite a traditionally softer quarter, boosted by the acquired city consumer portfolio. Treasury and investment incomes surged to an all-time high, boosted by stronger customer-related treasury income, as well as good performances from our trading and liquidity management activities, which benefited from the market volatility. Cost-to-income ratio, excluding the one-off, improved to 48.9% from strong income growth and disciplined spending. The record quarter profit growth ROE to 14.9%. Asset quality stayed resilient, with NPR ratios unchanged at 1.6%. We have increased our pre-emptive general allowances, resulting in total credit costs of 25 basis points. liquidity funding capital positions strengthened further. Our CT1 increased to 14%, a 70 basis point increase over the quarter. On the business front, year on year, retail operating profit doubled on an enlarged revenue base from the inclusion of the city consumer portfolio. Deposits income surged on wider net interest margin, while credit card activities picked up with the borders reopening. Wholesale saw double-digit growth led by margin expansion and strong customer-related treasury income. Global market benefited from market volatility but was impacted by the steeper cost of funding. Our retail customer base has surpassed the $7 million mark. Of this, around 77% are digitally acquired. Our Malaysian and Thai customer base, even after the integration, have further expanded during the quarter. The completion of the city acquisition in Vietnam is not big for us. It added another around 140,000 customers into the base. Organically, we have also acquired 225,000 customers through the quarter, with almost 60% coming through our digital channels. Following city acquisition, we have been targeting further growth in the multi-market partnerships. one of which Lee Cheong just highlighted earlier. Leveraging on our enlarged regional customer franchise, we now have 40 strategic and co-brand partnerships across multiple markets. I think this is in addition to the more than 1,000 in-country partnerships that we have. Net credit card fees doubled year-on-year in the first quarter, with Citi contributing around a quarter of those increases. and also a significant pickup in the consumer spending for the rest of the portfolio. Our asset under management rose 14% year-on-year to $160 billion, mostly from net new money inflows. And partly, like Yicheng said, we benefited from the flight to quality. We see opportunities in the wealth business in the near term, as we observed increased customer inquiries and flow recently. Our OMI channel strategy continues to show good traction. These customers are highly engaged and actually contribute up to three times the higher average revenue as compared to the traditional channel. Our wholesale business remains strong, despite the global economic headwinds that soften near-term growth outlook. We continue with our strategy in providing business connectivity across the region. Lee Cheong highlighted some of the numbers in there and the number of supply chain increasing by 30%. Our global FIG rose 23% while income outside our real estate, hospitality and financial institution sectors rose 41%. I mean, we are moving to sectors that are less under stress from the near-term outlook. Across the region, our cash management platform is seeing significant growth in transaction volumes and cashless payment. For the quarter, we continue to see growth momentum in Singapore, the ASEAN 4, and the developed markets. Singapore recorded exceptionally strong trading and investment income, though this was partially offset by the lower NIM from the deployment of the excess funds into high-quality liquid assets. ASEAN 4's strong performance was boosted by the newly acquired city portfolio in Malaysia, Thailand and Vietnam. For the developed markets, we recovered from last quarter because last quarter we had some mark-to-market volatilities and the market stabilised this quarter. On the detailed financials, I think I touched on this. I will skip this and let you read it. On the other indicators, first on net margin, net income income rose, sorry, net income income eased 6% to $2.4 billion due to a shorter quarter as well as lower net interest margin. Following consecutive quarters of sharp increases, we moderated 8 basis points to 2.14% in this quarter. Those margins were impacted by the catch-up in cost of funds as fixed deposits were progressively repriced at higher rates. Interbank and securities margin increased 9 basis points quarter-on-quarter as the excess liquidity earned from the expanded deposit base were deployed into this less yielding but still profitable high-quality liquid assets as compared to loans. This income rose double-digit at 14% Q-on-Q. Wealth management fees picked up after three consecutive soft quarters. signalling a return of investor confidence. Loans-related fees rebounded from last quarter, while card fees continued its growth momentum following the inclusion of the Citi portfolio. Customer-related Treasury income started off very well this year, setting a new high of $202 million driven by hedging demands. Trading and liquidity management activities also saw good performances this quarter as we managed to capture the trading opportunities amidst the market volatility. On the back of strong income growth and well-controlled spending, core cost-to-income ratio improved to 14.9%, including the one-off, this would have been 43.3%. We continue to focus on investments to build capabilities for strategic growth while maintaining our cost discipline. I think on the asset quality, our overall asset quality of our loans portfolio remained resilient. MPA formation was stable and within our expectation. and the NPO ratio was unchanged at 1.6%. On credit costs, specific allowance eased this quarter with net credit costs improving from 31 to 21 basis points. In view of the near-term macro uncertainty, we have added pre-emptive general allowances for this quarter to strengthen our total provision coverage, bringing total credit costs to 25 basis points for the quarter. As of March this year, the group total allowances stood at $4.9 billion, of which $3.3 billion was general allowances. I think our NPL coverage at 96% or 212% after collateral, and more important is the general provision coverage over performing loans improving to 1%. I think these are all very adequate and a very defensive balance sheet that we have built. We are confident that our prudent provision coverage will cushion against any potential downside risk from our credit portfolio. Loans growth momentum unfortunately has moderated, declining 1% for the quarter. Year-on-year, loans grew 1% on a constant currency basis, contributed by our ASEAN 4. If rising cost of funding decreases, We have reduced our reliance on wholesale market and focus on growing our customer deposit franchise. Customer deposits grew steadily at 2% for the quarter and 3% for the year. This quarter, we also managed to reverse the CASA declining trend with CASA deposits improving to 47.9%. I think you remember that we are having this pressure dropping from 50% over to I think we are quite happy that hopefully this will be the start we have stabilized that trend. Our liquidity position strengthened further this quarter with LCR at 154% and NSFR at 121%. I think these are all well above regulatory requirements. Our CT1 capital position is solid at 14%. This is contributed by the strong quarterly earnings and recovery by the mark-to-market valuation. coupled with very tight and efficient RWA management. I think with that, I conclude my presentation. I'll pass it back to Wendy.