" UOB seeks to be ASEAN' s top cross-border trade bank by 2026."

Laying out the bank&rsquo s medium-term goals by 2026, group CFO Lee Wai Fai expects more contributions from around Asean

 

[KUALA LUMPUR] UOB will move some of its back and middle-office functions to Malaysia, mainly in capital city Kuala Lumpur (KL), as it looks to maintain its cost-to-income ratio at 40 per cent by 2026, said group chief financial officer Lee Wai Fai.

 

This will help the lender sustain its return on equity (ROE) at around 14 per cent by 2026, together with increased contributions from around Asean and a higher mix of non-interest income, he said.

 

&ldquo Our first phase of offshoring will continue to be in KL, as it has a good hinterland of people that can supply the quality of staff that we want,&rdquo said Lee at the lender&rsquo s corporate day event in KL on Wednesday (Aug 14).

 

UOB&rsquo s corporate day was held in Malaysia for the first time since 2014, with investors, analysts and regional media in attendance. Speakers for 2024&rsquo s event include chief executive Wee Ee Cheong, Lee, as well as younger management staff across its wholesale and retail banking and tech pillars.

 

Offshoring is always an option because of the high cost in Singapore, although the lender is also mindful of the quality of labour supply, Lee said.

 

He noted that the lender has already started offshoring its operations some year ago, and it will accelerate the move, which includes centralising its card centres.

 

It will also look at other areas, such as compliance, where UOB can create models in Singapore and be run out of KL for operational efficiencies.

 

But Lee noted that restructuring the organisation and improving the efficiency of its business processes are equally important.

 

This means investing in people and technology, as the cost mix shifts from staff towards tech, he said.

 

Laying out the bank&rsquo s medium-term goals by 2026, Lee expects more contributions from around Asean.

 

He expects income from UOB&rsquo s businesses in four key markets &ndash Indonesia, Malaysia, Thailand and Vietnam &ndash to reach 30 per cent, from 26 per cent in 2023, while the bank also maintains at least 50 per cent of its income from Singapore.

 

He also expects non-interest income will contribute 37 per cent of income by 2026, from 2023&rsquo s 31 per cent, amid its growth engines in wealth, trade and customer treasury.

 

Lee said the bank&rsquo s wholesale business is pivoting towards trade, cash management and treasury, as it captures connectivity flows and enhanced product platforms.

 

He expects to see trade loans double, with loans contributed by its business in the four Asean markets reaching around 20 per cent by 2026, from 14 per cent in 2023.

 

Income contributed by these markets should rise to 25 per cent from 21 per cent as well.

 

Lee is also forecasting a high single-digit growth in its current and savings account (Casa) balance from 2023 to 2026, with support from cost-efficient Casa funding amid the current rate environment.

 

Meanwhile, Lee noted that UOB&rsquo s retail business &ndash enlarged by its acquisition of Citi&rsquo s retail franchise in the four Asean markets &ndash is able to capture rising wealth in the region.

 

He expects around 40 per cent of the retail income will come from the four Asean markets by 2026, from 33 per cent in 2023.

 

Retail Casa ratio should also rise to more than 55 per cent from 47 per cent, while 50 per cent of retail income will be driven by wealth and cards by 2026.

 

Lee also expects to double assets under management (AUM) of private banking customers.

 

UOB&rsquo s AUM stood at S$176 billion as at the end of 2023, of which around S$88 billion are from private-banking customers.

 

Citi acquisition

Speaking on the Citi portfolio that UOB bought, Lee said the acquisition accelerates its moves to scale up regionally &ndash it would have taken the lender &ldquo anywhere within five to 10 years&rdquo if it were done organically.

 

UOB is looking to serve around 10 million retail customers from around the region in the next three years, boosted by the acquisition. It currently has around eight million customers.

 

Noting changes in interest rate expectations, Lee said the gradual decline in rates is beneficial for commercial banks such as UOB.

 

UOB assumed 10 rate cuts by 2026, but Lee said the lender will watch recent market volatility and risks of US recession for any changes to the forecasts.

 

While margins may be affected slightly, it also reduces pressure on exchange rates in the region, especially for economics that have not hiked rates significantly, he said.

 

&ldquo Don&rsquo t forget, we are a commercial bank. Rate cuts and cycles are nothing new to us,&rdquo Lee said in his closing remarks for the event.

 

He expects margin pressures will be offset by growth in volume and fee activities &ndash lower interest rates should support domestic activities, while the bank is also accelerating growth in its franchise in the areas of wealth, trade and treasury.

 

Lee noted that if rate cuts accelerate, it would mean a deep recession in the US, but added this view is unsupported by current economic data.

 

Meanwhile, Asean economies are still growing, he added.

 

&ldquo With rates normalising gradually, we believe that it is good for the economy, and we believe in the resilience of Asean.&rdquo

This is the largest single-tranche issuance by a Singapore issuer in Australia

 

UOB : U11 -5.5% has priced A$1 billion (S$858.1 million) in four-year senior unsecured notes due 2028 under its US$30 billion global medium-term note programme.

 

The notes were priced on Friday (Aug 2) at the three-month Bank Bill Swap Rate (BBSW) plus 0.74 per cent. The BBSW is a short-term interest rate commonly used as a benchmark to price Australian securities and derivatives. 

 

This marks the largest conventional Australian dollar single-tranche senior bond from a Singaporean issuer. The bank also said this is the tightest spread for a benchmark sized four-year Australian dollar transaction from an Asian bank.

 

The notes are expected to be issued on Aug 8. 

 

This is the second time the bank is tapping the Australian dollar market this year. In April, it issued about A$1.3 billion in dual-tranche three-year unsecured notes. 

 

Koh Chin Chin, UOB&rsquo s head of group treasury, research and customer advocacy, said: &ldquo The Australian dollar market is integral to our funding strategy. This year, in fact, it has been our largest pool of international benchmark capital.&rdquo

 

The announcement comes after the bank released its earnings results last Thursday. 

 

&ldquo This provided a first-mover advantage in light of more anticipated supply &ndash more issuers globally are expected to tap the Australian dollar senior market amidst peak redemptions in August,&rdquo the bank noted. 

 

Its second-quarter net profit rose due to double-digit fee income growth and lower credit allowances. Net profit for the three months ended Jun 30, 2024, stood at S$1.43 billion, a 1 per cent increase from S$1.42 billion the previous year.

UOB&rsquo s net profit for its second quarter rose due to double-digit fee income growth and lower credit allowances, it said on Thursday (Aug 1).

 

Net profit for the three months ended June 30, 2024 stood at S$1.43 billion, compared with S$1.42 billion from the year-ago period.

 

Excluding one-off expenses incurred in the acquisition of Citigroup&rsquo s consumer banking businesses, the bank&rsquo s net profit for Q2 would have been S$1.49 billion &ndash beating the S$1.47 billion consensus forecast in a Bloomberg survey of three analysts.

 

The lender declared a dividend of S$0.88 per share for the half-year ended June 30, 2024, up from S$0.85 per share in the year-ago period.

 

Net interest income for the quarter fell 1 per cent to S$2.4 billion due to a moderation in net interest margin. Net interest margin was down 7 basis points (bps) to 2.05 per cent for the quarter, from 2.12 per cent in the previous corresponding period.

 

Other non-interest income was down 21 per cent to S$457 million as the bank saw lower swap gains and valuation on investments, even as it saw stronger customer-related treasury income.

 

The bank&rsquo s non-performing loans (NPL) ratio was 1.5 per cent, down 0.1 percentage point from the same period a year ago.

 

Total allowances fell by 26 per cent to S$395 million for the half-year ended June 30, 2024. The bank attributed this to lower specific and general allowances made as asset quality stabilised.

Lawrence Goh succeeds Hwee as head of group technology and operations

SUSAN Hwee, UOB : U11 +0.06%&rsquo s head of group technology and operations (GTO), will be succeeding Eddie Khoo as head of group retail at the bank, as Khoo retires from the role to become senior adviser to UOB Vietnam.

 

Accordingly, Lawrence Goh, currently chief operating officer for GTO and head of group infrastructure platform services, will take over as the head of GTO, UOB announced on Wednesday (Jul 24).

 

This management refresh will take effect on Sep 1, 2024.

 

In her current role, Hwee, who joined the bank in 2001, spearheads initiatives to transform the group&rsquo s digital and data architecture, and sets its global strategy and standards for technology, operations and information security, UOB said.

 

She also championed the systems and operational integration of its Asean acquisitions, the bank added. It called her &ldquo instrumental&rdquo in the development and innovation of its digital platform.

 

As head of group retail, she will drive UOB&rsquo s efforts to strengthen its regional consumer banking &ndash enhancing digital capabilities, expanding product offerings and solutions, deepening customer engagements and relationships, and connecting customers to opportunities across Asean.

 

&ldquo In particular, her deep expertise in technology and operations will accelerate the bank&rsquo s efforts to embed artificial intelligence, drive digital acquisition, and uplift service level and customer engagements across the bank&rsquo s enlarged customer base,&rdquo UOB said.

 

Hwee is filling the role that will be vacated by Khoo, who &ldquo with his wealth of experience in building and growing retail banking business will support UOB Vietnam&rsquo s management team to chart and embed the bank&rsquo s retail banking strategy in the country&rdquo .

 

&ldquo With Citigroup&rsquo s consumer banking businesses fully integrated into UOB for Indonesia, Malaysia and Thailand, Vietnam is also progressing well towards its completion in 2025,&rdquo UOB said, adding that there is &ldquo great potential&rdquo in Vietnam, and that it is imperative to strengthening its regional franchise.

 

Stepping up to fill the head of GTO role will be Goh, who &ldquo has more than 30 years of IT experience across both corporate and consultancy roles&rdquo .

 

&ldquo In his new role, he will continue to drive innovation and technology adoption and advancement, to enhance operational efficiency across the bank and support customer engagement and experiences,&rdquo UOB said.

 

Wee Ee Cheong, the bank&rsquo s deputy chairman and chief executive officer, said: &ldquo This management refresh is part of our ongoing efforts to strengthen UOB&rsquo s capabilities to serve our enlarged customer base across the region.&rdquo