The cover of this year’s Annual Report The Day After Tomorrow reminds us that in the pursuit of progress and growth, one must always act responsibly and with a long-term view. At UOB, our decisions and actions have always been guided by our values and our commitment to do what is right for our stakeholders not only for the now, but also for the long term.
2021 was a year where the twists and turns of the COVID-19 pandemic challenged many. Just as the future seemed more certain, new virus variants emerged. Global trade supplies were strained, as were geopolitics, for much of the year. Resilience, compassion and fortitude were needed. At UOB, we stood by our customers, colleagues and the community, backed by our strong balance sheet, prudent business approach and learning from previous crises and market cycles.
In keeping with the saying to never let a crisis go to waste, we persevered in enhancing capabilities in the areas of regional connectivity, digital transformation and sustainability. These areas are critical to us in delivering our strategic priorities and will ensure UOB’s competitive edge in the years to come. We also had the unique opportunity to make a significant and strategic acquisition of Citigroup’s consumer business in four ASEAN markets, subject to regulatory approval, that will bolster our position as a leading bank in and of the region.
Financial performance in 2021
Driven by strong performance across our franchise and resilient asset quality, the Group recorded a healthy performance in 2021 with total income of $9.8 billion and net profit of $4.1 billion for the financial year ended 31 December 2021. This was 40 per cent higher than the previous year as a result of stronger income growth and lower credit allowance as Singapore and regional economies gradually recovered in 2021.
Against the backdrop of an improving operating environment and a healthy growth in business activities and consumer spending, the Group saw strong performance across customer segments and geographies for the year. The Group’s fee income reached a new high of $2.4 billion on the back of stellar performance in wealth and loan-related activities. Net interest income rose six per cent from a year ago to $6.4 billion, led by healthy loan growth of 10 per cent. With proactive balance sheet management, net interest margin was kept stable at 1.56 per cent amid a low interest rate environment.
Net fee and commission income rose 21 per cent to a record $2.4 billion, driven by double-digit growth in most activities. Loan fees hit a new high of $698 million, as trade and investment transactions picked up momentum. As investor confidence returned, wealth management fees grew to a record $823 million. Stronger financial market activity also led to higher fund management fees while credit card fees recovered from a pick-up in consumer spending. Other non-interest income declined by 13 per cent; the growth in customer-related treasury income of 10 per cent was more than offset by the lower non-customer trading income compared with a year ago.
Without compromising on the need for strategic investments in our people and technology, including scaling up digital offerings in Singapore and ASEAN, total expenses increased three per cent to $4.3 billion. The cost-to-income ratio for the year improved 1.5 percentage points to 44.1 per cent.
Total allowance declined 58 per cent to $657 million and total credit costs on loans decreased from 57 basis points to 20 basis points as pre-emptive general allowance taken last year remained adequate. Asset quality remained resilient with the non-performing loan ratio steady at 1.6 per cent in the fourth quarter of 2021. The non-performing assets coverage remained strong at 96 per cent. While the path to recovery is clearer compared with a year ago, the Group continued to maintain performing loans coverage prudently at one per cent.
The Group’s liquidity and funding positions remained healthy with the fourth quarter’s average all-currency liquidity coverage ratio at 133 per cent and net stable funding ratio at 116 per cent, well above the minimum regulatory requirements. The loan-to-deposit ratio was stable at 87.0 per cent. As at 31 December 2021, the Group’s Common Equity Tier 1 Capital Adequacy Ratio remained strong at 13.5 per cent. Leverage ratio of 7.2 per cent was more than two times the regulatory requirement.
We continue to be one of the world’s strongest banks, with ratings of ‘Aa1’ from Moody’s Investors Service and ‘AA-’ from S&P Global Ratings and Fitch Ratings. This strength is something we do not take for granted and we are committed to generating sustainable and responsible growth for our stakeholders.
Standing right by our customers, colleagues and the community
UOB entered the pandemic from a position of strength. Through our long-term focus, disciplined growth and proactive risk management over the years, we have built a quality customer franchise across our Retail and Wholesale Banking businesses.
At the outset of the pandemic, we stepped up as the first bank in Singapore to offer its own relief assistance to businesses. We also actively supported the relief measures from governments around the region as they worked to cushion the impact of the pandemic.
To date, we have helped more than one million customers, including 20,000 small- and medium-sized enterprises (SMEs), with various forms of relief. In helping to put together a roadmap that leads our business customers from recovery to growth, we continue to support them with training and tools to transform their business models for the digital economy. At the heart of our COVID-19 response is our commitment to be there when it matters. This commitment was critical to UOB to being named the World’s Best Bank for SMEs by both Euromoney and Global Finance based on our understanding and anticipation of customer needs, in good times and bad.
Appreciating that our people are our greatest asset and that we needed to step up our support for them in these uncertain times, we developed a total wellness approach to their personal and professional well-being. From holding regular Mental Wellness Days activities and providing extended care measures, through to our annual #Better Future of Work Festival and Appreciation Month, we deepened the culture of care, growth and trust within UOB.
In the course of helping our people prepare for the future, we added a new track on artificial intelligence to our flagship Better U training programme. More than 15,000 of our people have completed the first level of Better U, giving them the knowledge essential to staying relevant in our fast-paced and changing industry. Understanding that making a meaningful contribution is important at all ages, we were also the first bank in Singapore to launch a gig employment model for our retired employees. The programme is part of UOB’s commitment to building an inclusive, flexible and diverse workforce of the future.
Just as we have been there for our customers and colleagues when it matters, we have also remained firm in our support of the more vulnerable in our community. In 2021, our people volunteered more than 32,700 hours to community building and through our UOB Heartbeat Programme, we contributed more than $6.1 million to communities in need, including more than $2.6 million specifically for COVID-related efforts. To help children who might not have access to laptops for online learning, we extended our UOB My Digital Space programme to enable more than 1,800 children around the region to stay connected. Art can strengthen community bonds and connect over time, distance and language. As such, in the 40th year of our UOB Painting of the Year programme, we created opportunities for those in the community to learn about art as therapy and to find avenues for people to express themselves. As our Annual Report cover attests, art’s ability to inspire, to unite and to connect is critical in times such as now.
Sustaining long-term growth through our strategic priorities
As a leading bank in the region, we are here to help build a sustainable future in Southeast Asia. To achieve that purpose, we continue to invest in three key areas:
Deepening our connectivity capabilities that facilitate increased trade and economic activity within ASEAN and other regions, particularly Greater China;
Creating innovative and personalised omni-channel financial solutions that enable our customers to achieve their individual and business goals; and
Delivering meaningful climate action and social impact through our suite of sustainable financing and investing solutions.
Deepening our regional connectivity capabilities and commitment
In 2021, strong trade and investment activities along the ASEAN-Greater China corridors helped drive our cross-border income despite uncertainties brought on by the pandemic and geopolitical situations. Last year, our cross-border income grew 10 per cent, contributing to a third of our Wholesale Banking income.
As a long-term and committed player in the region, we continued to invest in our regional franchise. During the year, we injected VND2 trillion in fresh capital to our Vietnam subsidiary as we help clients tap opportunities in one of the region’s fastest growing economies. Our efforts to draw investments to Vietnam earned us the recognition as the first Singapore bank to receive a certificate of merit award by Vietnam’s Ministry of Planning and Investment. We also increased UOB China’s capital base by RMB2 billion to step up support for our clients in seizing cross-border opportunities and to help them advance responsibly.
Our business is built on deep, long-term relationships and our ability to open doors for our clients in Southeast Asia and Greater China. As part of broadening our collaboration with like-minded partners across the region, we signed a strategic business partnership agreement with the Singapore Business Federation (SBF) as their only financial partner in the GlobalConnect@SBF programme. The agreement enables us to provide our connectivity solutions to more than 27,000 SBF members looking to expand overseas. We also launched new cross-border capabilities such as the first China-Thailand cross-border Renminbi cash sweeping solution between ASEAN and Greater China, as well as became the first Singapore bank to become an Appointed Cross-Currency Dealer in Renminbi and Indonesian Rupiah.
Creating innovative solutions
With COVID-19 accelerating digital adoption to the point where ‘digital by default’ is now the preference of the majority of ASEAN consumers, we brought together our two multi- award-winning digital banking solutions, TMRW and UOB Mighty, to create UOB TMRW.
The new platform harnesses the innovation of our digital bank TMRW and merges it with the scale and product depth of our mobile app UOB Mighty. Besides spearheading the acquisition of new customers to build regional scale in the most cost-effective manner, UOB TMRW also positions us well in advance of the emergence of digital banks across the region.
As part of creating innovative offerings for our customers, we also expanded our strategic partnerships within our UOB TMRW proposition. Partnering Fave, an e-commerce and payments app, our new UOB Rewards+ programme is one of the largest in Singapore and offers personalised reward recommendations based on customers’ spending and saving behaviour. In Indonesia, we launched TMRW Pay, an e-commerce check-out loan launched within Bhinneka’s mobile app and website, the country’s leading online-to-offline e-commerce platform. We believe such partnerships help to embed UOB’s products within an expanding ecosystem of strategic partners.
For our corporate clients, we also broadened our digital payment and trade capabilities. We continued with our regional roll-out of UOB Infinity, providing clients with essential business intelligence such as real-time tracking of cross-border payments. In the use of blockchain, we partnered the Infocomm Media Development Authority on its TradeTrust Utility which digitalises cross-border trade flows between Singapore and China. We also went to market with a landmark digital bond issuance with Marketnode, a joint venture between Singapore Exchange and Temasek, and in partnership with digital securities exchange ADDX, issued the inaugural sustainability-linked bond for Sembcorp Industries.
As part of our omni-channel approach, which gives customers choice in how they bank with us, we continued to transform and to reshape our branch network, reconfiguring more than 100 branches across the region by end 2021 to meet changing customer preferences. With affluence rising in the region and our digital services providing a simple, safe and swift option to conduct everyday banking, retail customers are increasingly visiting our branches for wealth advisory services, and SME clients for advisory on business and overseas expansion. We also tested a number of new branch formats, including a concept that focused on total wellness by combining health and wealth services for customers.
Serving the region’s increasingly affluent consumer base is a key pillar to our future growth. In 2021, we set up a Private Wealth group and reorganised our Private Bank business across three regional market groups, namely Singapore, Southeast Asia and North Asia, to better serve our high-net-worth clients with our holistic advisory capabilities and one-bank approach. In addition to deepening our bench strength in the area of Private Wealth, we have also continued to hire talent in key future growth areas including business transformation, technology, data analytics and sustainability.
Delivering meaningful climate action and social impact
Our time-tested values of Honour, Enterprise, Unity and Commitment have been critical in guiding how we build our business and to framing the legacy we want to create for the generations to come. In recognition of the increasing importance of driving a holistic approach to sustainable business practices across the Bank, during the year we appointed our first Chief Sustainability Officer and formed a dedicated Corporate Sustainability Office.
To help businesses advance responsibly, we have developed four financing frameworks focused on facilitating green trade and the circular economy, as well as creating smart cities and green buildings. These frameworks help businesses make meaningful progress on their green journey, with the Bank extending more than $15 billion in sustainable financing, which exceeds our target two years ahead of schedule. Other than our award-winning U-Solar programme, we rolled out two other holistic programmes – U-Drive and U-Energy – to help companies and individuals switch to electric vehicles and retrofit buildings with energy-efficient features. Through our innovation accelerator, The FinLab, we also launched the Sustainability Innovation Programme to help make sustainability for SMEs possible and practical.
The Bank’s inaugural issuance of a sustainability bond in 2021 –also the first globally from a bank – has helped us finance projects in areas such as green buildings, renewable energy and eligible social assets. We continued to steer wealth towards sustainable investing, with total assets under management for ESG-focused investments reaching $9 billion. For example, the UOB APAC Green REIT ETF and the United Smart Sustainable Singapore Bond Fund, launched by UOB Asset Management, offer investors sustainable income through investing in assets that are in line with the region’s and Singapore’s green development plans. Our separate Sustainability Report goes into more detail on the progress we have been making in forging a sustainable future.
Seizing opportunities as we emerge stronger from the pandemic
In the Bank’s 86-year history, we have acquired eight banks and other portfolios. With our entrepreneurial roots, we have always been on the lookout for the right opportunities, even as we focus on organic growth. But we have stayed disciplined, selective and patient.
The unique opportunity came in 2021 to acquire Citigroup’s consumer banking business in Indonesia, Malaysia, Thailand and Vietnam. It is a transformational deal, which came at the right time, with the right fit for our strategic ambition.
We will double our retail customer base in these four markets five years ahead of schedule, with a complementary base of customers, people and capabilities. The acquisition is expected to be immediately accretive to our earnings per share and return on equity, excluding one-off transaction costs.
Subject to regulatory approval, we look forward to integrating Citigroup’s quality portfolio and welcoming its team, and to creating value for our enlarged base of customers, employees and other stakeholders. The acquired business, together with our regional consumer franchise, will form a powerful combination that will scale up the UOB Group’s business and advance our position as a leading regional bank.
Confident of the region and our role in it
If history has taught us anything, it is that uncertainty and volatility will remain. Just as the outlook for the pandemic is improving and economies are reopening, geopolitical tensions are rising. We are monitoring these developments closely.
However, we believe in the people and potential of ASEAN. It is our home and we know first-hand the resilience, strength and abilities our businesses and communities possess to build a better tomorrow for all.
For UOB, we are well-positioned to capture the long-term opportunities of a resurgent ASEAN. We have been building a sustainable business with resilient asset quality. The ongoing transformation of our business, as well as the accelerated growth potential from our proposed Citigroup acquisition, provide us the foundation from which we can share a better future with our stakeholders.
UOB’s 2021 achievements would not have been possible without the unwavering commitment, collaboration, care and energy of our people and Management. I thank them for giving so much of themselves in support of our customers and each other. I would also like to thank the Board for their support and guidance as the Bank seized opportunities and pressed on with our purpose of building the future of ASEAN.
Finally, to our loyal customers and shareholders, thank you for your belief in UOB. I look forward to your continued support as UOB focuses on building a sustainable future for all.
Wee Ee Cheong
Deputy Chairman and
Chief Executive Officer