United Overseas Bank Limited

Good morning and thank you for joining us.

I think given the global environment remains uncertain, I think the three local Singapore banks, generally I think the result has been quite resilient, which is very encouraging. And even on our side, we see healthy trade and investment flows, stronger connectivity with China and ongoing supply chains shift into the region. As businesses look to ASEAN for growth and diversification, I believe we are continuing to well-positioned to support them. ASEAN is our hometown, our competitive advantage, and our engine of growth. Over the years, we have built a different shape of the franchise with deep localization, strong customer relationships, and value-added ecosystems. We will continue to invest in our growth drivers. Okay, let me just very briefly touch on three areas. Wholesale banking, retail and our priorities. Our wholesale banking franchise continues to benefit from growing trade, investment and connectivity across Asia. As clients increasingly operate across multiple markets, our regional footprint is a key dimension. ASEAN 4 is key growth contributing about 27% of wholesale income and growing faster than before. Transactional banking is a key pillar contributing to nearly half of wholesale banking income. Trade loans grew over 30%, while wholesale CASA deposits increased 9% year-on-year in the first half. We see encouraging momentum in foreign direct investment in Southeast Asia with larger and more strategic investments. Over the past decades, foreign direct investment into ASEAN more than doubled. Even as global foreign direct investment declined by above, through our FDI Advisory Unit, aborted more than 300 cross-border deals into the region in the last six months, with projected investment totaling $5.6 billion. More than 60% of these investments are in the industrial sectors. Reflecting digitalization, ongoing supply chain shift. These flows also create opportunities to deepen customer relations across our retail and wealth businesses through our one bank approach. On the asset quality front, we are addressing a few legacy accounts. Greater China Real Estate. These are well provided for Total credit costs remain within our guidance. In retail banking, we have one of the region's largest franchises. ASEAN 4 Markets now contribute about 35% of retail banking income and are growing faster. The scale we have built strengthens our brand, deepens partnerships, and enhances our ability to serve customers across markets. Our differentiated lifestyle solution helped us in customer acquisition and engagement. Our well-income, which every one of you are paying a lot of attention, grew 16% year on year in the first half, with ASEAN for up 30%. Growth was particularly strong in Malaysia, 29%, and Thailand, 8%. Now, looking ahead, We are focused on these growth priorities. First, to unlock the full value of our franchise. With more than 8 million customers across ASEAN, the opportunity is to deepen and become the primary bank for more customers. Our new value proposition for emerging and affluent customers is gaining traction. and we will continue to build on this momentum. Second, to accelerate wealth growth, we see significant opportunities across our SME and business owner sectors. And we are investing in talent, platform and products while expanding our North Asia presence to support regional wealth growth. Our strategic distribution partnership with Allianz, we just announced yesterday, will further support our growth ambitions. It will sharpen our focus on wealth advisory and distribution by combining EOB customer reach and advisory strength with Allianz investment capabilities. We will strengthen our wealth proposition. This position ask wealth to make customers evolving needs and support their long-term wealth goals. Third, to continue to capture a larger share of the trade and investment flows across ASEAN and between ASEAN and the rest of the world. ASEAN see more than US $200 billion annual FDI and more than US $2 trillion of trade flow. With our transaction banking platform, Sector Equity and Regional Network. We are well-placed to support businesses as they expand. Fourth, to reposition our Hong Kong franchise for more diversified and asset-like growth. Hong Kong remains an important gateway between Greater China, ASEAN and the rest of the world. Our focus is on building a more balanced franchise, including private banking and global markets. We, as usual, remain disciplined in how we allocate capital to drive long-term strategic priorities. As you can see from recent announcements, we seek to unlock value, drive sustainable earnings, and enhance long-term shareholder value. At the same time, we are investing in our core business franchise, including digital platform, data infrastructure, cybersecurity, and customer experience. We are committed to completing our 2 billion capital distribution plan by end 2027. Our ASEAN strategy is gaining traction. The opportunities ahead are significant. We are well positioned to capture them through our regional network, strong customer franchise, and one bank approach. With that, I will hand over to my CFO to provide some financial details. Thank you.

Good morning everyone. Before I go through the financial details, let me take you through a few key messages. The first, our franchise continues to deliver resilient performance amidst external uncertainty. The second quarter numbers for us in terms of net profit after tax was $1.5 billion, representing a 10% up year-on-year against the same period last year. The underlying business momentum remained healthy across all customer segments, complemented by some non-recurring gains from asset divestments. Secondly, our diversified franchise drives earnings stability. I mentioned earlier across customer segments, but it's also within the segments in terms of product categories such as wealth, arts, and CASA in retail. and in wholesale business, trade lending and CASA continues to contribute to our balanced and sustainable balance. Next, we continue to have adequate provision buffers. Our credit costs remain within guidance. There is one specific exposure which I'll talk about as I go through the asset quality slides later on. And lastly, in terms of capital position, our strong capital position allows us to support consistent shareholder returns. The board has declared an interim dividend of 88 cents per share. This is consistent with our commitment to give a 50% payout ratio to shareholders. And as CEO mentioned, our $2 billion share return program is on track. We have completed 40% of the share buyback. and will commit to complete or return a total of $2 billion by the end of 2027. Let me now move to some details around the recently announced deal with AGI which is short form for Allianz Global Investors. The purchase consideration was $535 million. This amounts to roughly a 330 million gain and an increase of CET ratio by around 14 basis points once completed. The price reflects a valuation of about 2.5 times price to book and 1.3% of AUM. The partnership strengthens our wealth management franchise by allowing UOB to focus on open architecture investment solutions for our customers and reinforces our advisory-led approach to customers. This allows us to focus on driving sustainable earnings growth and enhancing long-term shareholder value. I'll next go into the second quarter results in more detail. I mentioned earlier on The second quarter results delivered a net profit of $1.5 billion. That translates to an ROE of 11.8%. Net interest income did ease marginally, quarter on quarter. But with healthy loan growth and active balance sheet management, we were able to cushion the impact of margin pressure from that lower interest rate environment. Net fee income maintained positive momentum, rising 4%. from the last quarter, supported by record wealth fees which has helped to offset a moderation in investment banking activities. Trading and investment income saw a 6% decline amidst fewer liquidity management and market opportunities. However, the customer treasury flows continued to hold steady, underpinned by healthy demand for hedging and investment solutions. Asset quality was at 1.6%, NPA coverage including collateral improved to 306%. Our capital and funding position remained strong with CET ratio at 15.4% and NSFR at 114%. I'll next move to the first half of 2026 numbers. Net profit stood at $2.9 billion, resilient performance amid macroeconomic headwinds. This was a 3% increase year-on-year. Total income was flat compared to a year ago, reflecting the impact of lower benchmark rates and softer investment banking fee income. Other non-interest income remained resilient, supported by customer-related treasury activities and divestments. Expenses remain well controlled, modest increase of 2%, underscoring our disciplined approach to cost management. Allowance for credit losses declined 27%, as the release of general allowance more than offset the specific allowance for a single real estate account in Greater China. Now let me take you through the business lines. In our group retail business, The franchise continued to demonstrate consistent and disciplined delivery. Group Retail's income held steady at $2.6 billion, supported by strong growth in wealth and cards, which helped to offset margin pressures. Wealth delivered invested AUM and wealth income rising about 15% and 16%, respectively, year-on-year. Net New Money Flows was $4 billion for the first half of this year. Casa Mix has also improved from 57% to 58%, reflecting the strength and stability of our deposit franchise. I'll next move to the wholesale banking business. Despite the twin headwinds of lower interest rates and heightened competition for quality assets, the transaction banking business remains a key driver of our wholesale banking franchise, contributing to nearly half of the segment's income. Strong growth in CASA balances and trade loans supported them. Trade loans actually grew about 33%. Customer treasury income rose 2% year on year on the back of sustained client engagement amid a competitive environment. Gross loans expanded 8% year on year, mainly led by demand from the technology and financial sectors. Our diversification strategy continues to underpin earning stability with non-real estate sectors accounting for 72% of the portfolio and cross-border income at 28%, demonstrating our regional connectivity and client franchise. Next, in global markets, we saw a double-digit 15% growth year-on-year The treasury income from customer activities rose to a record half-year high of $584 million for the first half of 2026. This uplift was driven primarily by proactive asset liability and funding management, effective deployment of liquidity, as well as timely capture of market opportunities. Next, I'll touch on net interest income and margin. There was indeed loan margin compression, but mitigated by asset growth. On the left-hand side, you would see that the average interest-bearing assets actually grew 7% over the period, and net interest income declined 3%. I'll cover a little bit more detail in terms of net interest margin movements. The first quarter of 2026, we disclosed a 1.82 net interest margin. It saw 8 basis points decline to 1.74 and we are exiting the end of July timeline with 1.71. This was largely due to loan repricing in a lower rate environment. During the quarter, we did see healthy customer deposit and other funding inflows, but loan growth opportunities helped, and we deployed excess liquidity to support the net interest income. Sora appears to be bottoming out and is expected to trend higher in the second half of this year, and that will support NIP. We continue to maintain a disciplined approach balancing between NII optimization and NIM management. While we proactively pursue opportunities to enhance NII, we recognize that such actions may result in measured pressure on NIM in support of overall earnings performance. Next is on the Gross E-Income. Despite record wealth fees underpinning our second quarter performance, loan-related fees did soften, so overall fees stayed flat. In terms of expenses, we grew expenses 7% over the period, reflecting our continued investments in strategic priorities such as our people, technology, and regulatory activities. We will continue to maintain a disciplined approach in terms of cost management. Next, I'll move to NPA formation and NPR ratios. NPR ratio at 1.6%, with new NPAs at $902 million. This is largely the result of one real estate account in Greater China, which we have been monitoring closely. The provisions that we had set aside in the third quarter of last year had taken this into account and we continue to remain very proactive in reviewing and monitoring our credit portfolio. In terms of total credit costs, it stood at 28 basis points this quarter or 27 basis points for the first half, both within our guided range. Next. In terms of provisions coverage, it continues to remain adequate with an MPA coverage at 88%, but when MPA coverage includes collateral, that's 306%. We're confident of the provision coverage that we have put in place and our credit cost guidance of 25 to 30 basis points. Briefly on customer loans, it's up 5% year-on-year. It is broad-based across business segments and sectors. Healthy growth and wholesale term and trade lending as well as continued expansion of our mortgage portfolio underpins these numbers. On funding, liquidity and funding positions remain very strong with LCR at 159 and NSFR at 114%. Capital, CET ratio at 15.4% post-dividend payout on a fully loaded basis at 15.0%. Next on dividend, I mentioned earlier on the board has approved 88 cents per share. That's consistent with our payout ratio of 50%. Our share buyback program is guided by a disciplined capital management framework. We have, as I mentioned, completed about 40%, which amounts to $794 million. We remain committed to delivering this $2 billion capital return plan, either through share buyback or other means by the end of 2027. In summary, the four key messages again, is a set of resilient performance amid external uncertainty, a very diversified franchise that drives earning stability, adequate provision buffers to navigate uncertainties in the credit portfolio, and capital strength supporting consistent long-term shareholder returns. On the right side of the page, the 2026 outlook and guidance from us for loans, low single-digit growth, Full Year NIM of about 1.75 to 1.8, fee income at low single-digit growth, operating costs of low single-digit increase, and credit cost of total credit cost 25 to 30 basis points. With that, I conclude my presentation and we open the floor to questions.