United Overseas Bank Limited

Good morning and welcome to UOB's first quarter 2024 results briefing. I'm Wendy Wan from the Group Strategic Communications team and I'll 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 the time to our CEO. Mr Wee, please.

Good morning. Thank you for joining us today. The global environment remains uncertain. For now, we expect fewer interest rates cut due to strong US economy and sticky inflation. Interest rate is set to remain higher for longer. We are cautiously optimistic about this year's outlook. For Southeast Asia, despite the impact from high rates and a strong US dollar, we continue to see ongoing shifts in global supply chains and sustained tourism activities. China is taking steps to reduce its reliance on property sector and diversifying into new economic growth drivers. This should generate more trade and FDI opportunities between China and Southeast Asia. Against this backdrop, We have a relatively good start to the year. We delivered a core net profit of $1.6 billion, held steady year-on-year, and 5% higher quarter-on-quarter. Core ROE stood at 14%. Our core business driver for the first quarters are trending well overall. Net interest income was 2% lower as the 2% loan growth was more than offset by the lower net interest margins year on year. However, net interest margins stabilized at 2.02% quarter on quarter as we actively optimize our balance sheets. Fee income grew 5% across the board. and momentum will pick up in the coming months. Other non-interest income surge with record high trading and investment income. We are keeping a firm grip on costs, with cost-to-income ratio at 41.9%. Asset quality stays resilient, with NPL ratio stable at 1.5%, and lower credit costs for the quarter at 23 basis points. Our balance sheet remains strong with healthy levels of capital and funding. Now, let me give you some update on our core business segments. Our group retail business. Our retail banking business has done well across different revenue drivers. Wealth management is picking up. Our bank insurance business remains strong. growing double-digit year-on-year across all markets. We are seeing increasing demand for investment products, mostly into fixed income and structured products. There is potential to do more. At the same time, net new money continues to grow, bringing our total AUM to $179 billion, or 11% higher than last year. Deposit balances are seeing growth across all countries, reflecting our solid deposit franchise. As we transform our private well business, we added capabilities, we aim to attract new customers, grow our AOM and convert more of our AOM from deposits into well products. Our well offerings in the Singapore Tomorrow app were recently refreshed. and we are seeing positive feedback. Just to give you an example, now three in four unit trusts' subscriptions are performed digitally. For new to well customers, one in two have started to invest in unit trusts on our app. We will be launching a re-RAM advisory platform for our private bank with a focus on growing our customer wealth sustainably. we continue to attract quality RM and wealth management professionals to UOB. All of this should give a strong boost to our wealth management business. Card fee income grew 11% year-on-year to $90 million. Other than concerts, which all of you are very excited about, we plan to do more events targeting younger customers, And to share some colours, customers who use UOB cards to buy Taylor Swift concert tickets have continued to actively use our cards, even after buying the tickets. We expect consumer spending to stay strong this year. With our expanded regional franchise and more lifestyle offerings, we are well-placed to ride on this track. Our city integration is on track. We have integrated our portfolios in Malaysia, Indonesia, and just recently, Thailand. Our focus on cross-sell synergies is starting to gain traction. We aim to uplift customer spend and strengthen deposit balances and investments. Now, on group wholesale business. Our wholesale business was resilient despite a challenging environment. We are now RIPPING THE BENEFITS FOR THE INVESTMENT IN OUR PLATFORMS. SINCE 2018, AFTER WE ROLL OUT OUR CASH MANAGEMENT PLATFORM, WHOLESALE CASA HAS ALMOST DOUBLED, AND CUSTOMER CASH BALANCES ARE STABLE SINCE LAST QUARTER. OUR FINANCIAL SUPPLY CHAIN MANAGEMENT PLATFORM HAS ROLL OUT IN 6 OF OUR KEY MARKETS. Since then, we have added a healthy level of asset through the platform, and the platform is set to further drive our asset growth in the region. Together with our deep expertise in seven growth sectors that drive about 70% of Greater China and ASEAN FDI and trade flows, we have the platform ready to benefit in the next upturn of the trade and investment cycle. Our connectivity strategy is playing out well. Cross-border income now makes up a quarter of wholesale banking revenues, while transaction banking income contributes more than half. These are stable revenue streams with low capital requirements, derived from sticky client relationships. For this quarter, loan-related fees remain strong, driven by loan drawdown. Customer-related trading and investment income is up 8%. With our regional footprint, local expertise and sector-specific capabilities, we are well placed to connect our customers to opportunities across ASEAN and achieve our ambition of becoming the number one cross-border trade bank in ASEAN. Looking ahead, 2024 so far has been good. While the operating environment ahead may be uncertain, we will stay vigilant and nimble. With ASEAN's strong fundamentals, we remain confident of the region's underlying prospects and upside potential. As a long-term player, we believe in balancing growth with stability. We remain disciplined and prudent In maintaining surplus liquidity to give us strategic flexibility When it comes to our customer investment we believe in doing right by them providing solutions to help them grow their wealth in a sustainable manner instead of product pushing In recent years we have invested in building product capabilities in a diverse engines of growth We are now seeing positive results. We will also focus on harnessing these capabilities for our next stage of growth. Our 2024 guidance remains unchanged. Low single-digit loan growth. Double-digit fee growth led by our retail franchise. Total income growth to be positive from 2023 levels. Call cost-to-income ratio at around 41% to 42% on continued cost discipline. And total credit costs at the lower end of 25 to 30 basis points. I thank my colleagues for their teamwork and dedication. I now invite Wi-Fi to elaborate on our financials.

Thank you, H.M. And once again, good morning, everyone. On our results, I think each one mentioned that our core net profit increased 5% against the last quarter to $1.6 billion. I think including the one of city integration expenses, core profit would be down to $1.5 billion. Net interest income is this quarter, first owing to a shorter day count. but NIM was stable at 2.02% as active management of the excess liquidity buffered the lower loans margin. Fees income saw a good start to the year, with higher loans-related fees and pick-up in wealth demand, while cut fees normalized from last quarter's seasonal high. Treasury and investment income surged to an all-time high, boosted by record customer treasury income, as well as strong performances from trading and liquidity management activities. Cost-to-income ratio, excluding the one-off expenses, improved to 41.9% from strong income growth and disciplined spending. Asset quality remained resilient, with NPR ratios unchanged at 1.5%. Total credit costs on loans decreased as NPL formation was lower and exposures were well secured. Our capital and funding positions remain strong with CT1 at 13.9% and NSFR at 121% respectively. On some of the details, as mentioned, our first quarter core profit grew 5% Q1Q to $1.6 billion, driven by record trading and investment income and higher fees income. year-on-year, core profit saw a decline of 1%, mainly due to lower net interest income and the margins. I think the year-on-year decline on margins is still there. One-off costs are starting to taper off as we progressively complete the operational integration of Citi. Let me go through the segment performance in the next few slides. Against last year, retail registered healthy growth in cards and wealthies across the region. This, along with CASA volume growth, helped offset the margin impact on the mortgage portfolio from intense competition. Wholesale saw hefty CASA growth from last year. Strong investment banking activities, coupled with the regional pickup in trade volumes, cushioned the impact of margin compression as the market competes for higher quality loans. Global market captured opportunities in commodities trading alongside with improved performances from liquidity management activities. For our consumer business, post-city integration, our retail customer base has further grown organically by around 1% to 8.1 million. The proportion of digitally enabled customers continues to rise across the region. highlighting our success in onboarding the former Citi customers onto our Tomorrow platform. We continue to grow strategic partnerships with established brands in the region and we aim to boost the customer spending by providing a wider range of lifestyle offerings. Our quarterly card fees has sustained at a higher level post Citi acquisition. Card fees for the quarter increased 11% compared to a year ago. Our assets under management continue to demonstrate strong growth. We saw another $3 billion new money inflows in the first quarter this year, bringing our assets under management to $179 billion. Our wholesale business held up well in the face of an elevated interest rate environment. We continue to execute on our strategy by providing business connectivity across the region. Cross-border income is now a quarter of our wholesale banking income. While the number of anchor customers in our supply chain, those are more important because they bring in the rest of the spokes, has risen by 5% year-on-year. Our diversified strategy also allow us to capture opportunities in different segments with income from the hospitality sector rising 9% and the healthcare rising 13% year on year. We have seen significant growth in transaction volume and cashless payment across the region on our cash management platform. For geography, we continue to We saw continued franchise growth in Singapore, ASEAN 4, and North Asia this quarter. Singapore recorded higher trading and investment income, while North Asia benefited from commodity trading. ASEAN 4 overall performance grew on a constant currency basis. Although card fees were seasonally lower, this was offset by a pickup on loans-related fees. The ASEM 4 also registered higher trading and investment income from customer treasury flows and liquidity management activities. Let me go through the details of the income drivers. Net interest income is 2% to $2.4 billion due to a shorter quarter while net interest margin stabilized at 2.02%. Loans margin continued to be suppressed by market competition for good quality credits. covered with high cost of funding, as the impact from the recent deposit repricing has not fully come through in the quarter. Interbank and security margins improved 17 basis points, quarter on quarter, from active management of excess liquidity. We expect NIM to hold above 2% for the rest of this year. We have registered a good start to fees this year, increasing to $580 million in this quarter, driven by loans-related fees and pick-up in wealth and investor confidence gradually returned. Although wealth fees increased by 8%, total wealth product income, if we include the customer radiated treasury income, grew 19% quarter-on-quarter. Card spending was strong year-on-year. The decline in card fees quarter-on-quarter is mainly due to a seasonal higher spending in the fourth quarter, and some annual fee waivers from a city conversion. We did some of our conversion, which we actually weigh some of the fees to bring them on board. Customer-related treasury income recorded a new record at $219 million. This quarter, as retail bond sales and hedging activities increased from market expectation on flat rate cuts, So I think we sense the risk-owned elements slowly coming back into the market. This, coupled with robust performance from trading and equity management activities, boosted trading and investment income to an all-time high. On the back of an enlarged income base, cost-to-income ratio improved to 41.9% this quarter, including the one-off, the CIR would be at 44.6%. The one-off costs were tapered off in the second half, as we have progressively completed the operational merger for three of the biggest subsidiaries of Malaysia, Indonesia and Thailand. On asset quality, the overall asset quality of our loans portfolio remained resilient, with NPL ratios unchanged at 1.5% from last quarter, New NPL formation also decreased with lower recoveries and write-off. Total NPA inched up slightly to $5.1 billion for the quarter. Total credit costs improved to 23 basis points. Specific allowance is this quarter, with net credit costs improving from 26 to 20 basis points due to lower NPL formation. As at the end of the quarter, the group total allowances remain at $5 billion of which $3 billion was in general allowance, performing loans coverage at 0.9% as well as NPA coverage at 99% or 204% if we take it in the collateral. I think they are more than adequate. For loans, on a constant currency basis, loans grew 1% against last quarter and 3% from a year ago. The growth were mainly from selective group credits and short-term trade loans. Customer deposits rose steadily by 1% quarter-and-quarter and 4% year-on-year. Both retail and wholesale CASA deposits continue to register healthy growth, benefiting from our platform and client activities. Overall, CASA surpassed the 50% mark for the first time since 2022. Our liquidity position remains strong, with LCR at 160% and NSFR at 121%. These are all well above regulatory requirements. Our CT1 rose from last quarter to 13.9% boosted by profit accretion, while RWA remained relatively stable. With that, I conclude my presentation.