CEO’s Message on UOB Group
FY17/4Q17 Results

Dear Investors,

The UOB Group (the “Group”) attained a new high in net profit after tax of S$3.4 billion for full year 2017. This was 9% higher than a year ago, as our core businesses drove record levels in both net interest income and fee income. Together with our focus on balance sheet efficiency to put every dollar to good use, our return on risk-weighted assets improved to 1.63%.

Net interest income of S$5.5 billion rose 11% year-on-year. This was backed by loan growth of 5% and an increase in net interest margin of 6 basis points. Fee and commission income also registered a robust growth of 12% to S$2.2 billion, attributed mainly to our credit cards, fund management and wealth management businesses. Trading and investment income rose 3% to S$902 million on higher net gains from the disposals of investment securities. Expenses rose 9% from a year ago but cost-to-income ratio was stable at 45.5% as we stayed disciplined while investing in talent, technology and infrastructure to enhance the Group’s capabilities.

Non-performing loans (NPL) and specific allowance were higher by 27% and 49% respectively, as we conservatively classified the remaining vulnerable exposures in the oil and gas and shipping sectors, along with marked down collateral valuations. The impact was manageable, with NPL ratio slightly higher at 1.8%, given the sound quality of our broader loan book. Total credit costs were well-contained at 28 basis points, cushioned by the release of general allowance. Our allowance remains at a comfortable level to meet accounting and regulatory requirements coming into effect in 2018.

Our funding and capital positions were robust and well above regulatory requirements. All-currency liquidity coverage ratio for the quarter was an average 135%, while loan-to-deposit ratio was healthy at 85.8% as of 31 December 2017. The Group’s fully-loaded Common Equity Tier 1 Capital Adequacy Ratio stood at 14.7% and leverage ratio was 8.0%. Testifying to investors’ confidence in the Group’s strong financial standing, our covered bonds issuance in January 2018 was met with overwhelming demand from a diverse base of investors.

Given our healthy balance sheet and earnings growth, the Board recommended a final one-tier tax-exempt dividend of 45 cents and a special dividend of 20 cents. The Scrip Dividend Scheme will be applied, giving shareholders the option of receiving dividends in the form of new ordinary shares of the bank in lieu of cash. This brings our full year dividend to a total of 100 cents, amounting to a payout ratio of 49%.

With the improving outlook across the region, our customers are stepping up on their regional expansion plans and expect further growth in their personal wealth. Given our strong fundamentals, extensive regional network and expanded capabilities, we are well positioned to help our customers seize such opportunities as we continue to invest for the future to generate sustainable returns for all our stakeholders.

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

Wee Ee Cheong
Deputy Chairman & Chief Executive Officer
14 February 2018