Deputy Chairman and CEO's Report

The painting on the cover of this year’s Annual Report is a reminder to us all that we must consider carefully the environment in which we operate and the forces at play before striking (/) at the right moment. It resonates with UOB’s stance of staying disciplined, focused and nimble, as we seek and implement innovative solutions amid an increasingly digital and disrupted world. We consider the risks and rewards of any given opportunity. We also balance innovation and growth with stability in building our franchise sustainably.

Our discipline is derived from our time-tested values of Honour, Enterprise, Unity and Commitment. They are the foundation on which we have built UOB over eight decades and have been guiding the decisions we make and the actions we take. They underpin our unwavering focus on the fundamentals of our business: always putting our customers at the centre, building on our regional infrastructure, harnessing technology and digital solutions to make banking simpler, smarter and safer and making strategic investments for the future. Core to our approach is maintaining a strong balance sheet so that we can support our customers through economic cycles.

Even as global uncertainties heightened in 2018, we were steadfast in serving the needs of our customers and in growing our regional franchise. Our performance during the year reflected this discipline.

UOB achieved another new high in net profit, up 18 per cent to more than $4 billion. Our net interest income grew 13 per cent year on year, driven by broad-based loan growth and higher net interest margin. Net interest margin increased five basis points to 1.82 per cent, in line with the rising interest rate environment.

Net fee and commission income increased five per cent to $1.97 billion, driven by the strong performance in loan-related, credit card, trade-related and fund management fees. Other non-interest income declined 20 per cent to $930 million mainly due to unrealised mark-to-market on investment securities and lower gains from the sale of investment securities.

Our core businesses continued to deliver strong income growth. Total income for Group Retail rose four per cent to $3.95 billion, supported by healthy volume growth and improved deposit margin. Group Wholesale Banking reported an income growth of 11 per cent to $3.94 billion, led by double-digit loan growth and broad-based increase in fee and customer treasury income. Total income for Global Markets grew six per cent to $465 million, driven by favourable movements in foreign exchange and rates.

The Group continued to invest in our talent and technology to improve our productivity, our products and services and our customer experience and to reap the productivity benefits of digitalisation. As a result, total expenses increased seven per cent to $4 billion. The cost-to-income ratio for the year rose marginally to 43.9 per cent.

Our balance sheet remained strong and keeping it efficient remains a priority. The return on risk-weighted assets increased to 1.93 per cent compared with 1.63 per cent a year ago, driven by our record earnings.

Our asset quality was stable. Total credit costs on loans eased to 16 basis points, reflecting the fairly benign credit environment for the most of 2018, as well as low residual risks from the oil and gas and shipping sectors. Non-performing loan ratio improved further to 1.5 per cent from 1.8 per cent a year ago. Non-performing assets reserve coverage remained adequate at 87 per cent, or 202 per cent after taking collateral into account.

The Group’s funding position remained strong, with our loan-to-deposit ratio at a healthy 88 per cent as at end 2018. Our Singapore dollar and all-currency liquidity coverage ratios of 209 per cent and 135 per cent respectively as well as net stable funding ratio of 107 per cent were well above regulatory requirements. Against last year, gross loans grew 11 per cent to $262 billion while deposits grew seven per cent to $293 billion. We continued to manage actively and to optimise our asset-liability mix.

In 2018, we established our inaugural Global Medium Term Note Programme which enabled us to tap the US onshore market under Rule 144A of the US Securities Act for the first time. For more details on issuances in 2018, please refer to the Investors section of the Report.

Capital-wise, as at 31 December 2018, our Common Equity Tier 1 CAR remained strong at 13.9 per cent. Our leverage ratio of 7.6 per cent was more than double the regulatory minimum requirement. The Group remains well capitalised to navigate the macro uncertainties ahead.

In 2018, we maintained our position as one of the world’s strongest banks, with a rating of ‘Aa1’ by Moody’s and ‘AA-‘ from both Standard & Poor’s and Fitch Ratings.

Beyond deepening our physical presence, we enhanced our own capabilities to help our clients capitalise on regional growth opportunities.

We have been at the forefront of offering customised cross-border banking services to businesses through our regional network and the expertise of our FDI Advisory Unit. Since its set-up in 2011 to help our clients navigate the complexities of expanding into and across Asia, the FDI Advisory Unit has provided one-stop advisory and financial solutions to more than 2,100 clients.

With nine offices across the region, in 2018, the FDI Advisory Unit broadened its network of government agency partners, business associations and professional service providers. We signed Memoranda of Understanding (MOU) with Santander UK, Shanghai Pudong Bank, BKPM (Indonesia Investment Coordinating Board), the Suzhou Industrial Park Administrative Committee and the Vietnam Singapore Industrial Park. These MOUs are in addition to six other high-level agreements UOB has in place with government investment bodies across the region.

We see increased opportunities for businesses to move their supply chains to ASEAN especially with rising global trade tensions. Our comprehensive Southeast Asian network and established FDI advisory capabilities, position us well to facilitate such connectivity opportunities. In recognition of our efforts in increasing connectivity across the region, UOB was awarded Best Regional Bank of the Year for the Belt and Road Initiative in Southeast Asia at Asiamoney’s New Silk Road Finance Awards.

To entrench our deep relationships with our clients, we enhanced our capabilities in platforms and products, particularly in cash management and trade. Knowing that certain industry sectors with cross-border connectivity needs are vital for the growth of economies across the region, we set up a dedicated team of industry specialists to provide customised solutions for clients’ end-to-end needs, covering sectors ranging from consumer goods to building and construction.

Since the 1930s we have been helping small enterprises, first in Singapore and then the region, to grow and to prosper. As these small businesses form the backbone of economies, we also help equip them to capture opportunities in the borderless digital economy. In 2018, we extended UOB BizSmart from Singapore to Malaysia and Thailand to help enterprises digitalise. Through UOB BizSmart, they have access to an integrated digital business solution that enables them to increase their efficiency and productivity by automating time-consuming processes such as payroll, invoicing and inventory management. In 2019, we will extend UOB BizSmart to small enterprises in Indonesia.

Wee Ee Cheong

Deputy Chairman and Chief Executive Officer

February 2019

Other Key Sections

Corporate Governance

Five-year Group Performance

Our Awards and Accolades in 2018

Investor Reference

Quick Links

www.uobgroup.com

Investor Relations

Full Annual Report 2018

Past Years' Annual Report

Copyright © 2019 United Overseas Bank Limited
Company Reg. No. 193500026Z. All Rights Reserved.

As part of our efforts to reduce our environmental footprint, we will no longer distribute our Annual report by way of a CD-rom. We would like to invite you to join us in our sustainability efforts and refer to the electronic Annual Report.