Hot on the heels of DBS Group’s (SGX: D05) full year 2021 (FY2021) earnings report, United Overseas Bank Ltd (SGX: U11), or UOB, has also released its report card.
Similar to DBS, UOB also reported strong performance across its various customer segments and regions for FY2021 due to an improved economic environment.
Last month, the lender had announced a nearly S$5 billion acquisition of Citigroup’s (NYSE: C) consumer banking franchise in four Asian countries to help catalyse the bank’s growth in the years to come.
Meanwhile, UOB has worked hard to push for sustainability, with S$17 billion in sustainable financing and S$9 billion of assets under management (AUM) in ESG-focused investments.
Here are five other highlights from the bank’s latest earnings.
1. A robust set of financial numbers
UOB saw its net interest income for FY2021 rise by 6% year on year to S$6.4 billion despite the persistently low interest rate environment.
Fee and commission income jumped by 21% year on year to S$2.4 billion, a record high.
As a result, total income increased by 7% year on year to S$9.8 billion.
The bank kept a tight lid on expenses, which rose just 3% year on year, leading to a 10% year on year increase in operating profit before allowances to S$5.5 billion.
FY2021 saw a sharp drop in allowances to just S$657 million from S$1.55 billion in the prior year.
As a result, the bank’s net profit surged by 40% year on year to S$4 billion.
2. Stable NIM and a growing loan book
The bank saw its net interest margin (NIM) remain stable for FY2021, dipping by just 0.01 percentage points from 1.57% in FY2020 to 1.56%.
However, there are signs that NIM has stabilised and is on the rise.
The fourth quarter of 2021 (4Q2021) saw a slight uptick in NIM to 1.56% from 1.55% in the previous quarter.
Meanwhile, UOB’s loan book grew by 10% year on year to S$311 billion, with healthy increases coming from both Singapore and Greater China.
This increase in loans helped to offset the flat NIM to help deliver net interest income growth for the bank.
3. Record-high fee income
UOB reported that its fee income hit a record high of S$2.4 billion, driven by wealth management and loan-related activities.
Loan and trade-related fees jumped by 28.2% year on year to S$1 billion while wealth management fees rose 16% year on year to S$823 million.
The bank’s wealth advisory service also saw its AUM hit a record high level of S$139 billion.
4. Enhancing its digital footprint
The lender continues to work on increasing its digital footprint for more secure and efficient transactions.
Corporate PayNow saw the number of cashless payments to businesses nearly tripled year on year in FY2021.
UOB also saw a 25% year on year growth in digital business banking transactions across the group.
It plans to continue to scale its app, UOB TMRW, across ASEAN to reduce costs and deepen engagement with customers.
Since 4Q2018, the bank has acquired nearly 800,000 customers via this app.
5. Higher year on year dividend
In line with its robust financial performance, UOB has declared a final dividend of S$0.60, bringing the FY2021 dividend to S$1.20 per share.
This represents a payout of around half of the bank’s earnings and is sharply higher than the prior year’s dividend of S$0.78 as Singapore’s central bank had lifted dividend restrictions on banks in the middle of last year.
FY2021’s dividend was slightly lower than FY2019’s dividend of S$1.30 per share, but investors should note that this included a special dividend of S$0.20 per share.
If we exclude FY2020 and look at the bank’s track record since FY2018, investors will note that the lender has been steadily increasing both its interim and final dividends.
Get Smart: A bright outlook
UOB’s CEO Wee Ee Cheong expressed confidence about the future.
He believes that the “worst is behind us”, and sees strong institutional loan growth along with a rebound in card spending and wealth management activity.
He also commented that the opportunity to acquire Citigroup’s units came at an opportune time as it will allow the bank to double its customer base in the four countries of Indonesia, Malaysia, Thailand, and Vietnam.
The lender is confident in riding on the recovery and leveraging on its digital presence to penetrate deeper into the Asian region.
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Disclaimer: Royston Yang owns shares of DBS Group.