United Overseas Bank Limited

Welcome to UOB's full year 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'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 the time to our CEO. Mr. Wee, please.

Okay, thank you. Good morning. Thank you for joining us today. As you may know, our Chairman Emeritus, Dr. Wee Choy Yau, Overseas Bank Limited for the long term. At UOB, we are humble and touched by the outpouring of tributes and support, including all of you from the media. And thank you very much for your kind words and gestures. They mean a lot to the UOB team and to my family. Thank you. Now, let's get back to business as usual. Now let me start off on our financial results. 2023 was a challenging year. We saw slowing demand globally, more geopolitical tensions, sticky inflation, and higher interest rates. We expect some of this to perceive this year. But the impact should be manageable. In Asia, China is undergoing structural changes in its economy. Still, it delivered respectable growth in 2023 and we think there are still opportunities in targeted sectors. Nearer to home, Southeast Asia remains a bright spot, growing faster than the global economy. In this region, domestic demand remains robust. Tourism is recovering well, and the region is still a neck for manufacturing investments as MNC diversified their supply chains. At EOB, Our balance sheet remains strong. Our multi-year investments in our capabilities will position us well in this environment. In 2023, our enlarged scale and strength in the region have enabled us to deliver a robust set of results. Our core net profit grew 26%. to a new high of $6.1 billion. In 2022, it was $4.8 billion. This was fueled by strong income growth, which shows the power of our diversified business franchise. Net interest income grew 16%. lifted by strong margin expansion of 23 basis points, while loan grew 2% in constant currency terms. Net free income was up 4%, led by credit cards and wealth management. Trading and investment income more than doubled, supported by strong customer demand for hedging activities and positive market sentiment As fences remain well controlled, our cost-to-income ratio improves. Asset quality is healthy, with NPL ratio lowered at 1.5%. Our overall loan portfolio remains sound, with healthy provision buffers. Total credit costs at the low end of our guidance at 25 basis points. Our balance sheets remain strong with robust CET1 and liquidity ratios. As a prudent, long-term player, we focus on sustainable overall returns. We know that liquidity comes at a cost, but we prioritize the strategic flexibility that comes with it and the positive impact to our total income. With this set of receding results, the Board has recommended a final dividend of $0.85 per ordinary share, bringing our full-year dividend to 1.70% per share, and this represents a payout ratio of around 50%. Now, let me share some business highlights. Group Retail Businesses Our retail franchise performed well across the board, positioning us well to be the bank of choice for expiring individuals in the region. Card fee income continued to grow strongly in the fourth quarter, up 21%, from the third quarter to a record $125 million. For the full year, card fee increased 66%, a reflection of our expanded regional franchise. It is also a good indication that consumers are spending, a trend that should continue this year. Amid cautious investor sentiments, wealth management income rose 13%, supported by our growing bank-assured market shares. and a pickup in demand for fixed income products. Net new money continues to grow, bringing the total AUM to $176 billion. This year, our focus is to encourage customers to shift their funds towards well management products as their fixed deposits mature. Our city integration is on track We have successfully integrated our portfolios in Malaysia and Indonesia. By the second quarter, we would have integrated the Thailand portfolio. Our strategy now is to focus on cross-sell synergies and we aim to uplift customer spend and strengthen deposit balances and investments. We continue to leverage data and our human expertise to create a personalized banking experience for our customers. Our digital bank, UB Tomorrow, has allowed us to deepen engagement with customers across the region. We will continue to develop new capabilities to enhance their experiences, and customers can expect more digital offerings this year. Our wholesale banking business delivered a strong set of results. We continue to build our customer franchise and diversify growth engines, while playing to our strength in connectivity. Cross-water income grew 9% year-on-year, accounting for 25% of total wholesale income. Transaction banking income is now more than half of total wholesale banking income. Customer-related trading and investment income is up 9%. The credit growth outlook remains soft for the first half of this year, but we will continue to focus on quality clients. Our multi-year investments have boosted our capacity to grow and to seize opportunities from the supply chain shift. Our ambition is to be the number one cross-border trade bank in Asia. We differentiate ourselves by our strong connectivity and deep sector expertise in seven key areas that drive about 70% of Greater China and ASEAN FDI and trade flows. We see encouraging signs of activity in the region. For example, we welcome the recent announcement on the Johor Special Economic Zone. This will benefit companies across all sectors in Singapore and Malaysia, creating opportunities for the entire supply chain. With our strong regional network and enhanced platform capabilities, I believe UOB is well positioned to support our clients to capture these opportunities. Now, sustainability. As at the end of last year, we have extended $44.5 billion in sustainable financing. We see more sustainable finance adoption from green buildings to sector-wide economic activities. Sustainable trade finance has also started to gain traction. We continue to support clients in their decarbonisation efforts. We are making steady progress on our net-zero commitment. The emission pathways for all our priority sectors are trading well. On the CSR front, we continue to step up community efforts through our Heartbeat programs. We also recently extended our partnership with National Gallery Singapore to promote Southeast Asian art. UOB is well positioned to benefit from ASEAN's strategic role in global supply chains and its rising middle income. Everyone can talk about connectivity, but without an effective operating infrastructure, it will be difficult. We have gone through that journey in the last eight years. We have spent $800 million to build capabilities, regional payments, trade and cash platforms, which are now powering our connectivity business. Since 2011, long before the China Plus One strategy, we have put in place one-stop foreign direct investment advisory services to support businesses navigating the diverse ASEAN landscape. We are seeing early indication of this connectivity and other opportunities in our recent results. With our enlarged customer retail customer franchise and ASEAN benefiting from increased activities in transition finance, trade and FDI flow. We see an improving outlook for 2024. Now, for this year, our guidance is low single-digit loan growth with a focus on high-quality customers. Double-digit fee growth led by retail franchise in cards and wealth. Total income to be positive from 2023 levels. Core cost-to-income ratio at around 41% to 42% on cost discipline with one-time city integration cost to roll off substantially by second half. Total credit costs at low end of 25 to 30 basis points. Investing across our franchise remains a key priority so that we deliver stable and balanced growth through market cycles. And this includes investing in our people. This year, we will provide our junior employees, some 6,000 of them, group-wide an extra one-month bonus on a one-off basis. These colleagues are the most vulnerable group impacted by higher cost of living. We always ensure that our pay and benefits to all employees are fair and market competitive. As part of our philosophy of doing right by our people, I thank my colleagues for their teamwork and dedications. And now I move over to Wi-Fi to elaborate on our financial. Thank you.

Thank you, Yicheng. Once again, good morning to everyone. Okay, let me give you some colors of our financials. Our full-year core profit increased 28% to a record $6.1 billion. We've core ROE at 14.2%. Quarter and quarter, Call net profit sustained at $1.5 billion. Including the one-off expenses from the city integration, net profit would be $5.7 billion for the year and $1.4 billion for the quarter. Net interest margin moderated to 2.02% this quarter as the increase in cost of deposits outpaced the yield on loans as we remain cautious to support only quality customers. Fees income eased as loans-related fees normalized from the previous quarter hike. However, credit card fees as well as the strong performance from the Treasury customer flows, trading and liquidity management activities. For the full year, cost-to-income ratio excluding the one-off expenses, improved to 41.5% as the broad-based spending was outpaced by the strong income growth. Asset quality remained resilient with NPR ratios improving to 1.5%. Our credit cost at 25 basis points was within our expectation. Our capital and liquidity position remained strong with CT1 at 13.4% and NSFR at 120% respectively. Like my CEO said, our board has proposed a final dividend of $0.85 per share in view of the strong earnings. Let me give you some more colors. Our core franchise performed well. Year-on-year, retail operating profit increased on an enlarged franchise with record credit card fees and higher interest rates. Wholesale also saw growth from last year. driven by margin expansion and record investment banking fees, which cushioned the softer credit demand. Global market was impacted by the steeper funding costs, which more than offset the higher returns that we got from commodity trading and liquidity management. For the consumer side, the entire city acquisition has been successfully completed in all four ASEAN countries. I'm talking about the legal integration. For Malaysia and Indonesia, we have operationally integrated them. And like Yishong said, we will do that by the second quarter for Thailand this year. So by this year, the whole consumer platform will operate on the integrated basis. At the end of last year, our retail customer count has surpassed 8 million. including the integration of the city portfolio, which brought in additional 400,000 customers. Organically, we acquired close to 1 million new-to-bank customers during the year, which was 14% higher than the previous year. Our credit card fees surged 2.1% to another record high, driven by contribution from the enlarged portfolio and robust consumer spending throughout the region. Our increased presence has also enabled us to forge strategic partnerships with established brands across the region. This firmly positioned us to achieve our ambition of becoming the preferred bank for aspiring ASEAN customers. Overall, our brand performance has also significantly gone up across our key market, especially in Thailand, Indonesia and Vietnam. UOB was also ranked among the Singapore Strongest Brands within the top 500, world 500, most valuable brand in the world. The growth in our asset under management continued to be robust. We saw another $5 billion net new money inflows in the fourth quarter, bringing our assets under management up 14% to $176 billion. Our wholesale business did well with operating profit up 15% year-on-year. Cross-border income was up 9%. Our strong product suites resulting from our infrastructure investments over the year accelerated our reach into the region, putting us in a strong position to capture a larger share of cross-border trade transactions within the ASEAN region. The number of suppliers and distributors within our financial supply chain management grew 43% in 2023. This space is expected to expand following the rollout of our FNCM platform across ASEAN market only last year in 2023. Our cash management platform is also seeing higher digital adoption with robust growth transaction volumes and cashless payment. As mentioned in my earlier slides, our core engine is strong, as full-year core profit rose 26%, driven by strong net interest income, robust customer fees income, and trading and investment income. Fourth quarter core profit at $1.5 billion is stable from last quarter, and 7% higher than a year ago. Let me go through the next few slides in details. Net interest income was relatively unchanged from last quarter. There was pressure on loans margin due to competition for good quality credits, as well as picked up in deposit cost of funding. As you are aware, we have been investing our excess US dollars liquidity into SGX TBOs, which impacted our NIM. In addition, we have been funding our overseas branches with our strong SING dollars and US dollars deposit base. The resultant funding cost for us is often cheaper than the domestic interbank wholesale funding, However, the FX drop is reflected in the trading and investment line. If this were included, it would have added another 10 basis points to NIM for the year. We will continue to actively manage our balance sheet so as to ease the cost of funding and selectively lock in options fees in the long-term assets before the rates come down. Fees income eased as loans and trade-related fees normalized from the last quarter high. However, credit card fees continued its strong momentum to register another new record, boosted by the year-end holiday spending on an enlarged regional base. Wealth fees also recovered as the market outlook becomes clearer. Customer-related treasury income sustained its momentum with a slight decrease in the seasonal demand in the customer hedging activities. Trading and investment management activities continued to do well. Full-year core expenses rose 15% to $5.8 billion. The broad-based growth was outpaced by the income growth and cost-to-income ratio improved to 41.5%. staff costs rose 17%, mainly due to the integration of the city. I think even if you look at the UOB standalone, we will also have increased 12%. For this year, we expect the growth to be moderated to keep pace with income growth. We continue to exercise strong discipline in spending, along with the core synergies from the city integration we expect the cost-income ratio to stabilize at the 41% to 42% range. The overall asset quality of our loans portfolio remain resilient, and NPL ratios declined to 1.5% for the quarter. New NPA formation is within expectation, but with the higher recoveries and write-offs, total NPA reduced to $4.9 billion this quarter. credit costs remained manageable. Our prudent approach in recognising more of the SWACCIC allowance in the earlier quarters cushioned us from the continual worry about certain sectors in the economy. The full-year credit costs of the 5 basis points was within our expectations as per our earlier guidance. As at December 23, Group total allowance stood at $5 billion of which $3 billion was in general provision. Total NPA coverage is sound at 102% and 209% after taking collateral into account. We are confident we have sufficient reserve buffers to absorb potential losses from our credit portfolio. Core operating profit for the full year increased 24% with growth seen across most markets. The ASEAN 4 franchise was boosted by the inclusion of Citi, recording an overall 25% growth for the year. North Asia and the rest of the world registered higher trading and investment income. Loans momentum continued to be muted due to the uncertain macro environment. However, on a constant currency basis, loans grew 1% for the quarter and 2% for the year. In view of the uncertainties ahead, we maintain our focus on short-term and good quality credits. Customer deposits rose steadily by 1% quarter-in-quarter and 5% year-on-year. CASA to total deposit improved to 48.9%. The increase in customer deposits will allow the bank to do more cross-selling opportunities to further boost our fees income as we now understand their needs a lot better. Our liquidity position remains strong with the quarter LCR at 157% and NSFR at 120% both above the minimum regulatory requirement. Post the legal completion of the city acquisition in four countries, we remain well capitalized, with a healthy CET1 at 13.4%. In appreciation of the support from our shareholders, the Board is recommending a final dividend of $0.85 per ordinary share, including the interim dividend of $0.85. Total dividend per share for the full year now amounts to $1.70. representing a dividend payout ratio of 50%. With that, I will pass my presentation back to Wendy.