CEO’s Message on UOB Group
1Q18 Results

Dear Investors,

The UOB Group (the "Group") achieved record net profit after tax of S$978 million for the first quarter of 2018 (1Q18). This represented a 14% increase over the previous quarter, driven mainly by lower allowances and expenses, along with continued growth in net interest income and fee income.

Net interest income rose 1% quarter-on-quarter to S$1.5 billion, as improved operating conditions buoyed lending activities and rising interest rates lifted our net interest margins by 3 basis points to 1.84%. While lower trading income has led to non-interest income moderating mildly to S$761 million, fee and commission income grew 2% to S$517 million, supported by higher wealth management, fund management and loan-related fees. Expenses of S$987 million fell by 4% given higher year-end seasonal costs in the last quarter, resulting in cost-to-income ratio declining to 44.2%.

Our asset quality improved on the back of benign credit conditions and reduced lingering risk from the oil and gas and shipping sectors. With new non-performing loan (NPL) formation down to normalised levels, NPL ratio inched down to 1.7%, and total credit costs eased to 11 basis points. Non-performing assets reserve cover remained adequate at 91%, or 190% after taking collateral into account. The adoption of the Singapore Financial Reporting Standard (International) 9 Financial Instrument on 1 January 2018 had a muted financial impact.

We maintained our strong funding position and capitalisation. Our loan-to-deposit ratio and net stable funding ratio were healthy at 86.7% and 111% respectively as of 31 March 2018, while all-currency liquidity coverage ratio averaged 128% for 1Q18. Our recent maiden issuances of a covered bond in sterling, onshore Chinese yuan financial bond – both firsts by a Singapore bank – and US dollar-denominated senior notes were well-received and reflected investor confidence in the Bank. Our capital ratios stayed well above regulatory requirements. As of 31 March 2018, the Group's Common Equity Tier 1 Capital Adequacy Ratio stood at 14.9% and leverage ratio was 8.2%.

We continue to invest in our core franchise, riding on the growing digital connectivity in the region to enhance the customer experience for consumers and businesses. For example, we are the first regional bank to establish a joint venture to provide a next-generation digital credit assessment solution to make it smarter and faster for companies to extend credit to underserved customers across Southeast Asia.

Despite ongoing trade tensions and financial market volatilities, we are confident of Asia’s economic fundamentals and growth potential which continue to present immense opportunities given rising urbanisation, affluence and business flows. As a long-term player with an extensive footprint and connectivity in the region, UOB is well-placed to meet our customers’ growth needs.

On behalf of the management, thank you for your continued support as our valued investors.

Wee Ee Cheong
Deputy Chairman & Chief Executive Officer
3 May 2018