United Overseas Bank Limited

Good morning and welcome to UOB's first half 2024 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, kindly 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.

Thank you. Good morning. Thank you for joining us today. I'm sure all of you know this. Global growth continues to be weighted down by geopolitical tensions and high interest rates. While we expect higher or longer interest rates to stay, they have likely peaked. Recent U.S. inflation data has strengthened the case for the U.S. Fed to cut rates this year. A gradual easing of interest rates will be good for growth in Malaysia. In the second quarter, we have seen a pickup in commercial activities. Lower interest rates should propel these trends further. Closer to home, Ha Xiang continues to be resilient, supported by robust economic fundamentals and supply chain diversification, which has resulted in a steady inflow of foreign direct investments into the region. Amid an improving micro outlook, we achieved a good set of financial performance this quarter. Our core net profit was relatively stable year on year, at $3.1 billion for the first half of the year and $1.5 billion for the second quarter. Overall, we are seeing positive trends across our core businesses quarter to quarter. Net interest income grew from last quarter. Margin improved as we lowered cost of funds and we saw loan growth Second quarter, 2% quarter-on-quarter and 3% year-on-year across the board. E-income was near historical high, surpassing $600 million to grow across loan and trade-related fees, wealth management and credit card fees. In the first half of this year, E-income grew double-digit year-on-year, customer-related treasury income was stable. Our cost-to-income ratio improved. From second quarter, 41.8%, first quarter, 41.8%, and absolute corporate expenses is down 2% quarter-to-quarter. From the next quarter, the one-time integration cost from our city acquisition will be halved. as we move towards integration right now. Going forward, we will focus on extracting both revenue and cost synergies from this portfolio along with the other tech and system capabilities that we have built over the last few years. Asset quality remains resilient with NPR ratio at 1.5% and credit costs at 24 basis points. Our balance sheet continues to be strong with healthy levels of capital and funds. And with that, we are pleased to announce that the Board has recommended an interim dividend of $0.88 per share, representing a payout ratio of 51%. Now, let me give you some update on our core business segments. Our retail banking business grew steadily across various revenue drivers. Well management continues its positive momentum, delivering the strongest quarter over the past three years. With more conversions from fixed deposits to well management products across different product links, especially in bonds, structured products, and unit trusts for balance-sharing health state. Well sales are also growing steadily through our digital channels. We refresh Wealth Offering in Singapore Tomorrow in April. Since then our digital wealth sales volume in Singapore increased almost 250% year on year. In Thailand, we also launched a comprehensive suite of onshore and offshore funds on Tomorrow in April. Over the past two months, we have seen strong momentum with 40% of fund sales transacted digitally. With this, our fund sales volume in Thailand doubled. Net new money continued to grow, bringing our total AUM to $182 billion, or 10% higher year-on-year. Credit card fees sustained this growth this quarter. Here on here we are up 35%, quarter on quarter, I think we are up 8% credit card fees boosted by continued consumer confidence and spend. Our recent partnerships with the Singapore Tourism Board and Marina Bay Sands solidifies our leadership position in the lifestyle space. Just two weeks ago, we signed an MOU with South Korean company, Woori Card. You'll be card holder across ASEAN will enjoy card privilege in South Korea. Vice versa for Woorie Card customer in our key ASEAN markets by end of this year. In terms of concerts, I'm sure all of you are like to hear, but we continue to expand our offering. We have top singer from Amei just recently show in Singapore and Andy Lau from Hong Kong. we will continue to offer more lifestyle experiences for our customers. Deposit balances remain stable. Our mortgage sales volume picked up over the last quarter. The sales volume up 42% quarter to quarter. You may notice that the primary market is slow, but we are focusing on the secondary market as well as we try to retain as much mortgage as possible when people want to do the refinancing. So the volume actually very encouraging, pick up 42% bottom water. Post our city integration in Malaysia, Indonesia and Thailand, our customer base across the region continue to grow. We are on track to integrate our last portfolio in Vietnam in 2035. We will continue to sharpen our focus on achieving cross-sell synergies by uplifting customer spend, growing deposit balances, and expanding the wealth management business. Now, on group wholesale business. Our wholesale business performed well. We brought base growth. Loan growth momentum picked up over the last quarter in trade and term assets and across geographies. Loan drawdown hit its highest level in four quarters. Loan and trade-related fee grew 19% year-on-year in tandem with the pickup in loans and more deals booked during the quarter. We are delivering our connectivity strategy. Cross-border income now makes up 25% of wholesale banking revenue, while transaction banking income contributes 53% of wholesale banking revenue. Connecting businesses across the fast-growing ASEAN region is one of our key focus. One recent example is in Malaysia. Given our extensive footprint on both sides of the crosswind, we are excited about the progress of Johor Singapore Special Economic Zone. Last month, we hosted Johor Mitri Besar, the Chief Minister, at our UOB penthouse. where discussion will held between the Johor delegation and regional business leaders. The new economic zone will benefit multiple sectors in both countries. In fact, we have financed some of the early movers in the special economic zone, including data centers. Last week, we hosted another closed-door session with officials from Malaysia Finance, Ministry and Investors. As an ASEAN-focused bank, UOB is well-positioned to support business growth in our key markets across the region. Moving on to sustainability, we continue to support SMEs on their green journeys, recently with Partner Enterprise Singapore to launch the Sustainability Link Advisory Grants and Enablers for the State Programme. To this, we want to help SMEs set sustainability performance targets and simplify financing solutions for them. Overall, we are seeing strong demand in sustainable trade finance. As the green economy continues to grow and evolve, UOB will proactively support our customers to capture new opportunities. In this year's Euromoney Awards for Excellence, UOP and I are very proud to be recognized as the best bank for SME Worldwide in Asia and Singapore. We remain steadfast in supporting our customers in the decarbonization efforts. As we move into the second half of 2024, we are cautiously optimistic and will stay vigilant and disciplined. There are uncertainties in the horizon, particularly with the upcoming elections in the US and the economic challenges in China and Thailand. While this may present hurdles, we are confident in our ability to navigate them with a prudent approach. Our guidance for this year remain unchanged. Low single-digit loan growth, double-digit fee growth led by our retail franchise, total income growth to be positive on 2023. Our cost-to-income ratio at around 41% to 42% of continued cost discipline, and total credit costs at the lower end of 25% to 30% basis points. and I look forward to seeing some of you at our corporate day in Kuala Lumpur in two weeks' time. Our team will elaborate more on our group's targets and plans for the next few weeks. Now, let me pass Wi-Fi to take you through the financial numbers.

Thank you. Our second quarter core profit was stable at $1.5 billion, a 5% decrease from the previous quarter due to lower investment income. Our franchise activities in loans and fees picked up. Against the same quarter last year, core profit was 1% down. Net interest income rose 2% quarter-on-quarter. Our margin increased 3 basis points to 2.05%, on improved funding costs coupled with loans growth of 2%. Our fees, like Yicheng just said, was near record level. We registered, actually we registered the strongest was the first quarter of 2022. So over a two-year period, we have come back alongside with strong loans and trade-related fees. Asset quality remained resilient, with NPL unchanged at 1.5%. and total credit costs on loans at 24 basis points. Our capital and funding position remains strong, with CT1 at 13.4%, and you know that this is following the dividend payment that we normally do in the second quarter. Our board has declared an interim dividend of $0.88 a share. On some of the detailed numbers, I said core profit for the second quarter was 5% lower at $1.5 billion, as trading and investment income is up last quarter high. If we include the one-off cost relating to city integration, net profit would have been $1.4 billion. First half core profits saw a decline of 1% to $3.1 billion due mainly to lower net interest income from lower margin. Just from a year ago, the margins were still pretty high. A one-off integration cost will taper off in the coming quarters. as we have completed the operational integration of Citi in Malaysia, Indonesia, and most recently in Thailand. I'll just touch briefly on the business segment performance. I think each one has elaborated on most of this. Group retail registered a total income of $2.7 billion for the first half of 2024. In constant currency term, this was 1% higher than a year ago. We saw double-digit growth across areas, including CASA, card billings, wealth and treasury products, which help cushion the competitive effect on mortgage. Total income for group wholesale banking is 4% to $3.4 billion amid the keen competition for quality assets throughout the industry. The competitive pricing impact was offset by strong investment banking fees daily momentum growth in CASA and trade loans. On margins, our net interest income grew 2% this quarter, and net interest margin improved 3 basis points to 2.05%, along with a 2% growth for the quarter. Loans margin widened 4 basis points, supported by lower deposit costs, while interbank and securities margin sustained at 1.1% with proactive equity management. Our fees crossed the $600 million mark to near historical high of $618 million for the quarter. Loans registered fees were boosted by increased loans demand and a series of strong investment banking needs. Wealth momentum picked up, particularly in bonds and structured notes. as investor confidence returns. Year-on-year, first half net fees increased 11% with broad-based double-digit growth across those related wealth and credit cards. Customer treasury income remains strong at $216 million for the quarter, with steady retail demand for bonds and structured products across Singapore and the ASEAN Forum. other trading and investment income normalized from last quarter high bond sales gain coupled with lower income from gold commodity trading. All expenses for the first half were marginally higher than a year ago as we maintained very tight cost discipline while investing for the franchise growth and digital capabilities. Cost to income ratio was stable at 41.8% year to date and for the quarter as expenses at pace with income, including one-off costs relating to city integration. Cost to income would have been 44.1%. One-off costs are tapering off as we have completed the operation merger of city in the three bigger asset markets. On asset quality, the overall asset quality for our loans portfolio was broadly stable with NPL ratios unchanged at 1.5%. Total credit cost was stable at 24 basis point. The increase in section allowance was partially due to some of the operational day one issues in Thailand. I think we have addressed the customer-related frictions and we expect credit cost to improve in the next few quarters. As at June 2024, the group total allowance edged down to $4.9 billion of which $2.9 billion was in general allowance. This was largely due to write-off of a few chunky vulnerable accounts in the region. But the more technical part, when we write-off NPLs, we actually reverse some of the GP that we set today. But that doesn't mean that our GP, and in some of you, the MO, has reduced. I think we continue to set aside general allowance for the overall credit portfolio. as performing loans coverage stayed relatively stable at 0.9%, along with NPA coverage at 98% or 214% after taking collateral into consideration. Loans. I think loans finally saw some light. We grew $5 billion of 2% from the last quarter. This was driven by wholesale trade, alongside with the retail mortgage that Yichong highlighted earlier. Customer deposits were steady as retail CASA expansion more than offset the drop in the higher cost of FDs. Overall, CASA ratio increased to 51.5% amid healthy CASA momentum in Singapore. Our liquidity position remains sound with LCR at 149%, and NSFR at 118%, both well above the minimum regulatory requirements. Our CT1 position remains healthy at 13.4%. In appreciation of the support for our shareholders, the Board has declared an interim dividend of $0.88 per share. This is higher than the first half of $0.85 last year. We are committed to a consistent and sustainable return to our shareholders