United Overseas Bank Ltd (SGX: U11) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their earnings presentations. There may be useful and important information that investors can learn from the webcasts and transcripts. Roughly a month ago, United Overseas Bank, or UOB for short, had released its earnings for the quarter and year ended 31 December 2015. I had spent time watching a webcast of the earnings release and came away with 10 important things that may be of interest to investors. But before I share them, here’s a quick background of UOB for…
There may be useful and important information that investors can learn from the webcasts and transcripts. Roughly a month ago, United Overseas Bank, or UOB for short, had released its earnings for the quarter and year ended 31 December 2015. I had spent time watching a webcast of the earnings release and came away with 10 important things that may be of interest to investors.
But before I share them, here’s a quick background of UOB for context. The bank is one of the three big banks based out of Singapore. It currently has a network of over 500 offices in 19 countries and territories in Asia-Pacific, Western Europe, and North America. The bank counts the insurance provider United Overseas Insurance (SGX: U13) as a subsidiary.
With that, here are my notes:
- Wee Ee Cheong, UOB’s deputy chairman and chief executive, said that UOB had issued a US$8 billion covered bond program to broaden its funding sources and investor base.
- Wee also talked about UOB’s regional network expansion, with an eye towards the region’s long-term prospects. He said that UOB had selectively grown its network in Indonesia, Hong Kong, and Taiwan. The bank also opened a new branch in Myanmar last year.
- Lee Wai Fai, UOB’s chief financial officer, covered the bank’s key financial figures. UOB’s net interest margin (NIM) was 1.79% at the end of the fourth-quarter of 2015. This is the highest the bank has achieved over the past four quarters. For the full year, the NIM averaged at 1.77%; for some perspective, this matched DBS Group Holdings Ltd’s (SGX: D05) 2015 NIM of 1.77%. DBS Group is Singapore’s largest bank.
- UOB’s non-interest income for 2015 was S$3.12 billion, 7.6% higher than in 2014. UOB benefited from higher fee income, and trading and investment income. Fee income contributed S$1.88 billion for the year, making up 60% of the total non-interest income.
- Total expenses for the bank in 2015 rose by 14%. If we exclude one-off expenses related to the SG50 celebrations (Singapore celebrated its 50th year of independence in 2015), total expenses would have risen by 9% instead. The main drivers, according to Lee, is the ongoing investment in people and technology. Lee stressed that UOB will remain disciplined in spending, pointing to the normalized expense to income ratio of 43.4% (excluding one-off costs). This is lower than the 45% registered by DBS Group in 2015.
- Group Wholesale Banking (GWB), which covers businesses and corporates, is the largest segment for UOB by operating profit. The GWB segment accounted for S$2.66 billion in operating profit or 60% of the total pie. The Group Retail (GR) segment registered S$1.57 billion or a 35% piece. Both GWB and GR saw increasing operating profits, but UOB’s overall result was held back by lower operating profit from Global Markets and Investment Management (GMIM).
- Singapore is the key contributor for UOB from a geographical standpoint, pitching in S$2.69 billion or 60% of the operating profit. Malaysia was second in line with S$616 million while Greater China logged in S$377 million in operating profit. Elsewhere, Thailand and Indonesia contributed S$283 million and S$131 million, respectively, with the rest coming from other countries.
- UOB recorded S$207 billion in customer loans for the full year. Singapore accounted for S$116 billion of the loans or 56% of the total. Greater China had $25.2 billion while Malaysia clocked in S$24.6 billion. Meanwhile, Thailand and Indonesia each accounted for S$11.5 billion in loans.
- It’s not too different in the deposit base. Singapore comes out tops again with 70% of total customer deposits or S$168.6 billion. Malaysia lined up in second place with S$25.4 billion. Elsewhere, Greater China and Thailand each pitched in a little over S$12 billion in customer deposits while Indonesia came in with S$6.6 billion.
- In ab earlier article, I mentioned that UOB had reported a loan-to-deposit ratio of 84.7%. This is lower than DBS Group’s selfsame figure of 88%. UOB also had a liquidity coverage ratio (LCR) of 142% for the fourth-quarter of 2015, above the Monetary Authority of Singapore’s minimum requirement of 100% by 2019.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.