United Overseas Bank 4Q21 - UOB Kay Hian 2022-02-17: Building Scale & Deepening Regional Franchise.


United Overseas Bank 4Q21 - Building Scale & Deepening Regional Franchise.

  • UOB reported net profit of S$1,017m for 4Q21 (+47% y-o-y, -3% q-o-q). Net interest income increased 11.1% y-o-y due to loan growth of 10.5% y-o-y and NIM expansion of 1bp q-o-q to 1.56%. Fees and trading & investment income were seasonally softer. NPL formation was elevated at S$670m, coming mainly from several secured corporate loans.
  • For 2022, UOB's management guided mid-to-high single-digit loan growth, double-digit growth in non-interest income, and normalisation of credit costs higher to 20-25bp.

UOB's 4Q21 Results

  • UOB (SGX:U11) reported net profit of S$1,017m for 4Q21, up 47% y-o-y but down 3% q-o-q. The results were in line with consensus’ estimates of S$998m.
  • Loans grew 10.5% y-o-y in 4Q21, driven by large corporate and institutional clients. By industry, transport & communications, building & construction and financial institutions & holding companies grew 16%, 16% and 30% y-o-y respectively. Singapore, Greater China and Others (mainly Australia, the UK and the US) grew 10%, 10% and 32% y-o-y respectively. UOB rolled out several sustainable financing solutions. Total sustainable financing reached S$17b in 2021, surpassing its 2023 target of S$15b. Management has set a new sustainable financing target of S$30b by 2025.
  • Benefitting from stable NIM. NIM receded 1bp q-o-q but expanded 1bp q-o-q to 1.56% in 4Q21. Thus, net interest income grew 11.1% y-o-y.
  • Non-interest income seasonally softer. Fees & commissions grew 12.8% y-o-y but remained flat q-o-q at S$589m in 4Q21. Growth from credit cards (+2% q-o-q) and loans related (+4% q-o-q) fees were offset by a seasonal decline in wealth management (-8% q-o-q). Assets under management (AUM) from high affluent customers grew 4% y-o-y and reached a new record of S$139b. Total card billings in Singapore increased 17% in 2021. Trading and investment income dropped 31% q-o-q due to lower customer flows and seasonally weaker transaction volume.
  • Disciplined in controlling expenses. Cost-to-income ratio improved 1.3ppt y-o-y to 44.3% in 4Q21. Operating expenses increased 4.4% y-o-y. UOB will prioritise strategic investments in people and technology to scale up its digital offering in Singapore and the ASEAN region.
  • Sequential up-tick in NPLs. Non-performing loans (NPL) balance increased 6.4% q-o-q. NPL formation was higher at S$670m due to several secured corporate accounts. A property company in Singapore accounted for one third, or about S$220m, of the increase in NPLs. The loan is secured by an asset, which has already been put up for auction. NPL ratio deteriorated 0.1ppt q-o-q to 1.6%. NPLs for buildings & construction and financial institutions & holding companies increased by S$292m and S$196m y-o-y respectively.
  • Lower credit costs helped by write-back in general provisions. Total provisions dropped 31% q-o-q in 4Q21. UOB set aside specific provisions of S$170m (3Q21: S$155m). It wrote back general provisions of S$76m due to more clarity and increased confidence in an improved outlook. Thus, total credit costs dropped from 20bp in 3Q21 to 12bp in 4Q21.
  • The board has recommended final dividend of S$0.60.


  • Guided positive outlook for deepening engagement. UOB has acquired 800,000 customers regionally across its core markets through its unified digital platform UOB TMRW during 2018-21. The bank will serve these new customers through an omni-channel approach as their needs evolve. Its UOB TMRW will help UOB build scale and reduce cost to serve. UOB has set up a private wealth group, encompassing UOB Private Bank and UOB Privilege Banking to sharpen its focus on serving high net worth clients.
  • See

Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-02-17
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000