4Q23: Building Regional Franchise For Consumer Businesses
UOB reported net profit of S$1,498m for 4Q23 (+7% yoy). Wealth management fees grew 21% yoy due to growth in bancassurance and pick-up in demand for fixed income products. Credit card fees grew 69% yoy due to higher customer spends and expanded regional franchise after consolidating Citi consumer businesses. UOB generated ROE of 13.9% in 2H23 and CET-1 remains robust at 13.4% in 4Q23.
RESULTS
• United Overseas Bank (UOB) reported net profit of S$1,498m for 4Q23 (+7% yoy), which is in line with consensus estimate of S$1,514m. Including the one-off expenses of S$94m for Citi integration cost, net profit is lower at S$1,403m.
• Competition for high quality credits. NIM narrowed 20bp yoy and 7bp qoq to 2.02% in 4Q23 due to loans margin compression caused by competition for high quality credits. Loans expanded 2% yoy on a constant currency basis. Loan-to-deposit ratio dipped 3.4ppt yoy to 82.2%. Net interest income dropped 6% yoy in 4Q23.
• Fees grew at double digit rate. Fees increased 17% yoy in 4Q23, aided by a low base last year. Wealth management fees grew 21% yoy due to growth in bancassurance and pick-up in demand for fixed income products. UOB attracted net new money inflows of S$22b and assets under management from affluent customers grew to 14% yoy to S$176b. Credit card fees grew by a sizeable 69% yoy due to higher customer spends and expanded regional franchise after consolidating Citi consumer businesses.
• Trading & investment income increased 78% yoy to S$362m in 4Q23. Customer related treasury income sustained its momentum and trading & investment income delivered good performance.
• Disciplined cost management. Operating expenses increased 4% yoy (excluding Citi integration costs). Cost-to-income ratio was healthy at 43.2% (4Q22: 42.6%). Staff costs and IT-related expenses increased 8% and 2% respectively to support strategic investments. UOB will provide its junior employees with an extra month of bonus for 6,000 employees across the Group, including 600 in Singapore, in line with National Wages Council’s recommendation to help employees cope with the rising costs of living.
• Asset quality was stable. NPL ratio improved 0.1ppt qoq to 1.5%. New non-performing assets were S$389m, which were more than offset by recoveries of S$288m and write-offs of S$218m. Credit costs were 25bp (4Q22: 21bp) with specific provision of S$212m (4Q22: S$253m) and release of pre-emptive general provisions of S$9m.
• Sustainable and consistent dividend payout. The board has declared final dividend of 85 S cents, in line with committed dividend payout ratio of 50%.
• UOB achieved ROE of 13.9% in 2H23 and CET-1 remains robust at 13.4% in 4Q23.
