Broker Name and Date of Report

• Broker: CGS International Securities
• Date: October 15, 2024

3Q24 Financial Overview

United Overseas Bank (UOB) is projected to report a net profit of S$1.6 billion for 3Q24, representing an 8% quarter-on-quarter (qoq) and a 9% year-on-year (yoy) increase. The bank’s performance has been driven by stable net interest margins (NIMs), steady loan growth, and improving fee income, particularly in wealth management and credit card fees.

Net Interest Margin (NIM) Stability

UOB’s NIM is expected to remain stable at 2.05% in 3Q24, benefiting from the bank’s earlier efforts to optimize funding costs. Asset yields have remained steady, helping to offset the pressure from a slightly lower interest rate environment. UOB’s funding cost optimization, achieved earlier in the year, is likely to sustain its NIM performance in the upcoming quarters.

Wealth Management and Fee Income

Wealth management continues to be a key driver of UOB’s fee income growth. In 3Q24, UOB saw an increasing deployment of deposits into wealth products, as well as rising credit card and loan-related fees. This broad-based improvement in fee income highlights UOB’s ability to capitalize on customer demand for a diverse range of financial products.

Treasury Income and Thailand Operations

UOB’s treasury income is projected to see a boost in 3Q24, reflecting favorable market conditions and the bank’s ability to take advantage of market opportunities. The bank’s portfolio in Thailand, which experienced elevated delinquencies following UOB’s acquisition of Citibank’s retail business, appears to have stabilized in 3Q24. UOB does not expect further impairments in Thailand, with delinquencies peaking during the quarter.

Citi Integration Costs

The integration of Citibank’s retail banking operations into UOB has been progressing well. In 3Q24, Citi-related integration costs are expected to halve to approximately S$35 million. This reduction in costs marks a positive step forward for UOB as it works to fully incorporate Citibank’s operations and realize synergies from the acquisition.

Risk Management and Asset Quality

UOB has not detected significant stresses in its loan portfolio thus far, despite the elevated interest rate environment. The bank has been diligent in managing its asset quality, particularly in key markets, and does not foresee any major write-backs of management overlays. This conservative approach to risk management ensures that UOB remains well-positioned to weather any potential macroeconomic challenges.

Dividend Strategy and Capital Management

UOB’s strong capital position allows it to maintain a consistent dividend strategy. Investors will likely focus on the bank’s dividend plans, as UOB continues to generate solid earnings growth while optimizing its funding structure. The bank’s ability to navigate market challenges and deliver steady profitability supports its ongoing capital management initiatives.

This summary is based entirely on the information provided in the report dated October 15, 2024, by CGS International Securities.