United Overseas Bank Limited

Good morning and welcome to UOB's third quarter 2023 results briefing. I'm Wendy Wan from the Group Strategic Communications team and I will be your MC for today. This morning we have Mr. Wee E Chong, UOB's 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. For those in the room with us, please put your mobile phones to silent. For those on Microsoft Teams, please put yourself on mute for now. Without further ado, I will now pass our time to Mr. Wee, please.

Thank you. Good morning. Thank you for joining us today. As all of you know, the global economy has become more uncertain. The impact of higher for longer interest rates has filtered through the economy. Recent geopolitical tensions have added to the volatility. This will slow ASEAN growth, but the region's fundamentals are still strong, with low unemployment rates and robust consumption. We expect the ASEAN region to remain relatively more resilient with 4% growth for this year and 4.9% for next year. ASEAN is also attracting more investment flows, especially in new economy sectors such as sustainability. With global supply chains continue to shift into ASEAN, we are optimistic about the region's growth potential. Closer to home, Singapore continues to draw inflows in a flight to quality. As a key player in Singapore's financial system, we will continue to stay vigilant to uphold Singapore's reputation as a safe haven and participate in industry efforts to strengthen the country's position as a wealth management hub For UOB, we have built a resilient portfolio that allows us to ride through market cycles. Prudent management is our hallmark, and we prefer to take a long-term view in all that we do. Against this backdrop, we delivered a set of robust financial results this quarter. our core net profit for the third quarter grew 5% year-on-year to $1.5 billion, driven by strong income growth across our diversified businesses. For the first nine months, our core net profit was up 33%. Despite muted loan growth, net interest income increased, boosted by higher margins, as we focus on quality credit opportunities. Higher interest rates continue to support our balance sheet profile. Fee income recovers strongly across all key drivers, loan and trade related fees, wealth management and credit card fees. In particular, Card fee income crossed the $100 million mark for the first time to a record quarterly high, growing 89% year-on-year. This shows the consumers are still willing to spend. Customer-related treasury income continues to do well, accounting for more than half of trading and investment income. More customers are engaging in hedging activities given market volatility. The one-off costs for our city acquisition were largely tapered off by end of this year. Asset quality is resilient with a stable MPR ratio. Even as specific provisions stay high due to portfolio revaluations, our strong provisioning buffers kept total credit costs within our guidance. Our balance sheets remain strong with robust CET1 and liquidity ratio. With deposit outpacing loan growth, our liquidity ratio remains at record levels. Now, let me share some highlights on our core business segments. Group retail business. We have a strong retail franchise, well supported by diversified revenue drivers. Net interest income remains our main income driver. We are seeing healthy net interest margin. CASA deposits continue to grow. Our capabilities in UOB Tomorrow have also helped us build strong deposit balances. Quarterly credit card fees reached an all-time high of $104 million. Wealth management fees improved this quarter, although investor sentiments remained subdued. Net new money continued to grow. bringing our total AUM to $170 billion. This shows the strength of our customer franchise. The city integration is also progressing well. We have successfully migrated about 700,000 ex-city customers in Malaysia onto our platforms. Integration for the other three banks, three markets, sorry, Indonesia, Thailand and Vietnam is on track. Our retail customer base continues to expand and we are ready to serve our regional customers. We expanded our service capabilities in Indonesia as we recently upgraded our Tomorrow app. This will ensure a seamless transition of ex-city customers in Indonesia onto the EOB platform. We are engaging strategic partners such as regional airlines to extend lifestyle offerings that meet the needs and aspirations of our customers. Last week, we announced another mega lifestyle offering across our key ASEAN markets of Singapore, Malaysia, Thailand and Indonesia, Exurance Mathematics Tour Concert. Our wholesale business delivered a commendable set of results, despite a challenging operating environment. Loans were flat quarter on quarter, reflecting soft market conditions. Customer cash balances were up 3% year to date, despite rising interest rates as a result of our improved capabilities over the years. Our fee income did well. Loan and trade-related fees grew strongly this quarter, the highest in five quarters. Our focus on trade financing has created synergies for other business units, boosting customer flow income in the global market business. We have invested $800 million over the past eight years to build our regional payments, trade and cash platforms. Regardless of market cycles, I believe we will continue to invest in our franchise as we believe in a long-term structural growth prospects of the region. And we started to see results and we are continuing to deepen relationship with our clients who are assessing more of our solutions. Our investment will put us in a good position to capture The next upturn in the economic cycle. Now, on sustainability. We recently set up a sustainability advisory panel where we have appointed three industry experts to advise on our sustainability strategy, targets, and initiatives. Since our net zero commitment a year ago, we have made positive headway on our target sectors. We will be releasing our first Net Zero Progress Report next week. Look out for it. When talking about ESG, it is not just about the environment. We are equally focused on what we do on the social and governance fronts. We continue to keep the good going through our CSR efforts such as encouraging our people to volunteer and investing in our people through various upskilling and reskilling programs. Our board was recently awarded the Best Managed Board at the Singapore Corporate Awards. The microeconomic environment ahead should remain bumpy, but our strong balance sheets and diversified revenue driver will help smoothen the ride. Across our businesses we see encouraging trends. Strong credit card spending signalling consumer confidence. Positive net new money inflows and a growing deposit base. And by next year, the one-off costs related to our Citigroup acquisition are expected to roll off. Importantly, Our customer franchise is growing and the momentum is strong. Much of this is due to the continued investment in our products, platforms and people. We are here for the long term and we have the trust of our customers that we will support them in these uncertain times. We continue to be optimistic on the ASEAN region. and we believe the situation in China will stabilise and continue to improve on the back of support measures recently announced. Overall, UOB is in a good position to capitalise on the pockets of opportunities as they come along. Our next year guidance, 2024, Mid-single-digit loan growth with a focus on high-quality customers Margins to remain supported at current levels Double-digit fee growth Stable cost-to-income ratio with one-time city integration costs to substantially roll off Credit costs at around 25 to 30 basis points I thank my colleagues for their hard work and dedications and teamwork. Now, let me switch over to Wi-Fi to elaborate on our finances. Thank you.

Thank you, Lee Cheong. And once again, good morning, everybody. Thanks for joining us today. Now back to the detail of the results. Our core profit is 2% quarter-on-quarter to $1.5 billion. with core ROE at 13.9%. For the nine-month period, core profit increased 33% to $4.6 billion. Net interest income was relatively unchanged this quarter as the longer day count and wider loans margin were offset by lower margins earned on the excess funds deployed. Fees income for the quarter was at the second highest history in the bank, powered by strong loans deals and credit card fees, which hit a record high. Customer-related treasury income continued its momentum, growing 9% for the quarter to almost $200 million. Cost-to-income ratio, excluding the one-off, improved to 41%, as spending kept pace with income growth. Credit cost was at lower at 19 basis point this quarter as the right back of general allowance more than offset the higher specific allowances. Asset quality remained resilient with NPR ratio at 1.6%. Our capital and liquidity position remains strong with CET1 at 13% and NSFR at 121% respectively. For the business itself, year on year, retail operating profit increased on an enlarged franchise with Citi, alongside higher interest rates, as well as picked up in credit card and wealth activities. Wholesale, they saw a double-digit growth from last year, driven mainly by margin expansion and sustained treasury customer flows. Global market managed to capture the trading opportunities amidst the market volatility, but they were impacted by the higher funding costs. Like Yiqiang said, our retail customer base continued to grow organically post-city. Now, we serve over 7.5 million retail customers in the region, of which 77% are digitally enabled. And this will increase by year-end when we integrate Indonesia. We acquired new-to-bank customers at a faster pace. In the nine months of this year, our new-to-bank customers were 28% higher compared to the same period last year. The growth can be attributed to our enhanced digital capabilities and lifestyle offerings that align with customers' needs. the largest scale of our retail business, following the city acquisition, enabled us to collaborate with more regional strategic partners and broaden lifestyle products. Currently, we have 45 strategic and co-brand partnerships across multiple markets to cater to our aspiring ASEAN customers. Customer confidence in this region remains upbeat, evident from our record credit card fees. We'll continue to see positive net new money inflow, bringing our total assets under management up 21% year-on-year to $170 million. For the wholesale business, they showed resilient results despite the uncertain environment. Cross-border income was up 14%. Our investment in trade and cash systems over the years positioned us well to be the number one cross-border trade bank in ASEAN. The number of suppliers and distributors within our financial supply chain management continued to grow, increasing 35% year-on-year. Across the region, our cash management platform is seeing higher digital adoption with robust growth in transaction volume and cashless payment. For the nine months of this year, in the summary, we rose 33% driven by strong net interest income and trading and investment income. The third quarter core profit was at $1.5 billion, which is 5% higher than a year ago. Okay, let me now go through the details. Net interest income was unchanged from last quarter. Core franchise loans margin expanded two basis points to 2.64% for the quarter. Interbank and securities margin declined to 0.93% as excess liquidity was deployed into high-quality yielding assets while cost of funds continued to stay high. As a result, NIM moderated to 2.09% this quarter. With funding costs likely to stay elevated, we'll continue to actively manage our balance sheet to keep NIMS stable. Fees income hit a bright spot this quarter, recording a near historical high of $591 million. Loans and trade-related fees surged from some strong corporate deals. Credit card fees crossed the $100 million mark to a new record this quarter, reflecting the upbeat consumer confidence that boosted spending. Wealth fees also recovered, though at a more moderate pace. Customer-related Treasury income sustained momentum, growing 9% quarter-on-quarter to $198 million, with continued demand for hedging activities from our customers. Trading and liquidity management activities did well, while the other T&I income line was impacted by some valuation volatility on our investments. Core expenses decreased 2% quarter-on-quarter in tandem with the lower income, with cost-to-income ratio held steady at 41%. And like I said, including the one-off city integration, this will be 44.4%. We expect the one-off costs to taper off as we progressively complete the operational merger in the four ASEAN countries. By this year, we have completed Malaysia, and later part of the year, Indonesia. First quarter, or early part of the second quarter, Thailand. And then what we are left with is our small operation in Vietnam. So most of the things will taper off by the first half of next year. so that we can actually then look at productive improvements. The overall asset quality of our loans portfolio remain resilient, with NPL ratio unchanged at 1.6%. New NPA formation reduced to 267 million. Specific allowances increased this quarter as we revised the collateral value of our NPLs to reflect the near-term uncertainty. This was cushioned by the unwinding of the general allowances, which we have earmarked for these accounts. However, additional general allowances was provided for the overall credit portfolio. Hence, if you look at the next page, the total general allowances remain relatively stable. Let me go to the next page. So this actually shows the breakdown between your GP and your SP. So as of September 2023, My total allowances stayed at $5.1 billion, of which $3 billion was for non-impact assets, which we generally call GP. So the level is actually quite stable, and I can take questions on that. Total NPA coverage strengthened to 102% or 205% after taking collateral into account. We believe our provisional reserves are adequate to absorb anticipated losses from our credit portfolio. Core operating profit for the nine months increased 34% with growth across various markets. Year on year, the ASEM franchise was boosted by the inclusion of Citi portfolio in Malaysia, Thailand, Vietnam. Against last quarter, the ASEM 4 was largely impacted by margin compression from higher cost of funds North Asia, on the other hand, registered higher trading and investment income, mainly from commodity trading, which they are very strong and essentially gold. Loans momentum continued to be soft due to the uncertain macro environment. On a constant currency basis, loans were relative unchanged against last quarter and a year ago. In view of the uncertainties ahead, we maintain our focus on short-term and good quality credits. Customer deposits rose steadily by 1%, quarter-on-quarter, and 2% year-on-year. CASA to total deposit mix ratio improved to 48.2%. Our one-account value proposition refresh is bearing results, as absolute CASA actually continued to grow over the last three quarters this year. our liquidity position remains strong with the quarter LCR at 153% and NSFR at 121%, both well above the minimum regulatory requirements. So you notice in this number that our balance sheet is very defensive. We have a lot of excess liquidity, mainly because we continue to focus on our long-term loans. And if you realize the worry about the rising interest rate on NSFR, et cetera, we have actually increased that over the years. And we have a lot of short-term surpluses that we were not sure of how the market react. But our balance sheet is very strong. However, we sacrificed two, three basis points to the margin to strengthen balance sheet. Our total capital remains healthy with CT1 at 13%. Overseas Bank Limited Overseas Bank Limited Overseas Bank Limited