RETAIL BANKING | Staff Reporter, Singapore

UOB's net profits down 33% to $4.34b in FY2020

The group emphasized wealth and connectivity-related services as tenets for growth.

UOB showed signs of recovery in its fourth quarter results, although it was not enough to offset the contraction of its full-year profits.

Net profit after tax climbed 3% QoQ to $688m in Q4 2020 compared to $668m in the previous quarter, according to the bank’s latest SGX filing. However, this is still 32% YoY lower than the $1.01b it hit in Q4 2019.

For the whole 2020, net profit after tax totalled $2.91b, down 33% YoY from $4.34b in 2019. Total income is $9.18b, down 9% from 2019.

The losses were mostly driven by UOB raising allowances for credit and other losses as a buffer the expected negative after-effects of the pandemic, especially once moratoriums and government support lift across the region. A pre-emptive credit allowance of $916m was built up during the year to strengthen the balance sheet.

Looking ahead, UOB’s deputy chairman Wee Ee Cheong echoed a more positive outlook, and shared plans for UOB’s growth that included refining the bank’s regional strategy—with a particular focus in China.

“In the coming 12 to 18 months, macroeconomic conditions are likely to improve, albeit gradually. ASEAN’s connectivity with Greater China and the region’s growing affluence continues to be drivers of growth,” said Cheong.

To ensure sustainable growth, Cheong said that UOB will continue to sharpen their regional strategy, whilst upholding asset quality and maintaining cost discipline and efficiencies.

“With net interest margin expected to stay low, we are rebalancing our business with an emphasis on wealth and connectivity-related products and services that bring greater value to our customers and also drive higher fee income,” Cheong added. “This is in keeping with our omni-channel approach to serving our customers as they shift to digital banking solutions.”

Data from their latest results announcement showed that UOB’s net interest income is 8% YoY lower at $6.04b in 2020 from 2019’s $6.56b, as policy makers across regional markets reduced interest rates to support the economy and market liquidity, according to UOB.

Meanwhile, the group’s liquidity and funding positions remained robust with 4Q20’s average all-currency liquidity coverage ratio at 139% and net stable funding ratio at 125%. The loan-to-deposit ratio was also stable at 85.4%.

In line with the Monetary Authority of Singapore’s guidance for local banks to moderate dividends for FY2020, the board has recommended the payment of a final dividend of 39 cents per ordinary share with an option for scrip dividend.

Together with the interim dividend of 39 cents per ordinary share, the total dividend for FY2020 will be 78 cents per ordinary share, representing a payout ratio of approximately 45%, says UOB.

Note: all figures are in Singapore dollar

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