It wants to return to shareholders S$800 million in surplus capital and buy back S$2 billion worth of its own shares

 

UOB&rsquo s board has announced a S$3 billion package to distribute surplus capital over the next three years, as it aims to bring down excess capital.

 

The lender is proposing a special dividend of S$0.50 per share &ndash paying out S$800 million of UOB&rsquo s surplus capital &ndash over two tranches in 2025.

 

It also introduced a S$2 billion share buyback programme, where over the next three years shares will be acquired from the open market and cancelled.

 

UOB on Wednesday (Feb 19) posted a net profit of S$1.52 billion for the fourth quarter ended Dec 31, 2024, up 8.6 per cent from S$1.4 billion a year earlier. 

 

&ldquo Our disciplined approach of pursuing long-term growth with stability has served us well, and we are confident of enhancing shareholders&rsquo value in the years to come,&rdquo said UOB chief executive Wee Ee Cheong, at the lender&rsquo s fourth-quarter results briefing on Wednesday.

 

The package is a long-awaited move from UOB. During its third-quarter results briefing in November 2024, Wee said the bank was open to investing its excess capital in growth, or returning it to shareholders, whether through share buybacks or more dividends.

 

This came after analysts and investors were focused on the Singapore banks for their capital return plans, given that all three had excess capital arising from Basel IV reforms.

 

As at December 2024, UOB&rsquo s Common Equity Tier-1 (CET-1) ratio stood at 15.5 per cent. After taking into account the Basel IV reforms, its fully loaded CET-1 would have been 15.4 per cent.

 

UOB group chief financial officer Lee Wai Fai said: &ldquo On the back of this capital strength, we are confident to continue to deliver consistent and sustainable returns to our shareholders.&rdquo

 

The local banking trio are due to report their fourth quarter and full year 2024 results in February, with DBS on Feb 10, UOB on Feb 19 and OCBC on Feb 26.

Investors eye more share buybacks, special dividends as DBS, OCBC, UOB release Q4 earnings

 

He noted that the lender is committed to bringing its CET-1 ratio down to 14 per cent.

 

Post the distribution package, UOB will likely be left with excess capital of a few hundred million dollars, although &ldquo that number could grow as the base grows&rdquo .

 

Lee added: &ldquo If the earnings capacity is a lot stronger, technically the CET-1 ratio will be higher because you&rsquo re adding to the base.&rdquo

 

He also pointed out the need to keep capital for growth, especially as the lender remains confident of Asean&rsquo s prospects. &ldquo We are confident that we still have some work to do in the region, and we&rsquo re confident that we need the risk-weighted assets to push this vision of regional growth.&rdquo

 

DBS was the first mover among the local banks to return its excess capital. It announced a surprise S$3 billion share buyback programme alongside its third-quarter results in November 2024. This was on top of its normal dividends, and previously announced special dividends and bonus issues.

 

During its Q4 results announcement last week, DBS added that it will issue a capital return dividend of S$0.15 per share per quarter. This will be paid out over the financial year 2025, and it will pay out a similar amount in the next two years.

 

As for OCBC, its management earlier said it prefers to give dividends over share buybacks to return excess capital to shareholders.

 

It is also looking to keep its excess capital as dry powder to support franchise flows and potential inorganic growth opportunities that may pop up. OCBC is due to report its Q4 results on Feb 26.

The lender proposes a final dividend of S$0.92 per share and a special dividend of S$0.50 per share over two tranches in 2025

 

UOB : U11 -0.18% on Wednesday (Feb 19) posted a net profit of S$1.52 billion for the fourth quarter ended December, up 8.6 per cent from S$1.4 billion in the previous corresponding period.

 

This included S$17 million in one-off expenses from the lender&rsquo s Citigroup integration costs after taxes, which was 81.9 per cent lower than the S$94 million recorded in the same period the previous year.

 

The earnings beat the S$1.48 billion consensus forecast in a Bloomberg survey of six analysts.

 

The lender has proposed a higher final dividend of S$0.92 per share for the half-year period, from S$0.85 the year before.

 

This brings the full-year dividend to S$1.80 per share, representing a payout ratio of about 50 per cent. The lender is also proposing a special dividend of S$0.50 per share, paying out S$800 million of UOB&rsquo s surplus capital, over two tranches in 2025.

 

The final dividend and first tranche of special dividend of S$0.25 will be paid out on May 13. The remaining special dividend will be issued on Aug 28.

 

Net interest income for the quarter was up 2 per cent on the year at S$2.45 billion, driven by loan growth of 5 per cent. Net fee income was stable at S$567 million. Other non-interest income was up 1.1 per cent on the year at S$443 million.

 

Net interest margin for Q4 stood at 2 per cent, down from 2.02 per cent in the same period a year earlier. This was mainly due to lower benchmark rates.

 

Core operating expenses increased from investment in franchise growth, with core cost-to-income ratio at 45 per cent. Total allowances rose to S$337 million on higher specific allowance.

 

UOB&rsquo s non-performing loan ratio remained at 1.5 per cent as at Dec 31, 2024.

 

For the full year, net profit was up 5.8 per cent at a record S$6.05 billion. Excluding the one-off Citigroup integration costs, core net profit would be S$6.23 billion, up 2.9 per cent on the year.

 

UOB deputy chairman and chief executive Wee Ee Cheong said the group&rsquo s record net profit was driven by strong fee income, as well as &ldquo robust trading and investment income&rdquo . He also expects &ldquo continued revenue growth this year&rdquo .

 

He is also confident that the Asean region will &ldquo remain resilient&rdquo , supported by higher domestic retail spending and stronger influx of foreign direct investment.

 

&ldquo Our strengthened market position in our key Asean markets, enlarged customer base and enhanced platforms will position us well to seize regional opportunities amid a reconfiguration of global trade and supply chains,&rdquo he added.

 

Annualised earnings per share stood at S$3.56 for FY2024, up from S$3.34 the year before.

 

Net interest income for the full year was stable at S$9.67 billion, driven by healthy loan growth.

 

Loan growth offset the effect of lower net interest margin, which fell to 2.03 per cent in FY2024, from 2.09 per cent previously. The contraction in net interest margin came from interest rate movements, said UOB.

 

Net fee income was up 7 per cent on the year at S$2.4 billion. This was driven by double-digit growth in wealth management fees from improved investor sentiments, stronger card fees on an enlarged regional franchise, as well as higher loan fees as lending and capital market activities picked up.

 

Other non-interest income jumped 10 per cent on the year to S$2.23 billion. This came amid higher customer-related treasury income from increased retail bond sales, strong hedging demands, as well as good performance from trading and liquidity management activities.

 

Total allowances were stable at S$926 million, with total credit costs on loans at 27 basis points.

 

Returning surplus capital

As part of the bank&rsquo s capital distribution strategy, the board has announced a S$3 billion package to distribute surplus capital over the next three years. The package comprises special dividends and share buybacks. 

 

This includes the introduction of a S$2 billion share buyback programme, where shares will be acquired from the open market and cancelled.

 

The lender noted that its capital position &ldquo will remain strong&rdquo , following the capital distribution.

 

The package is estimated to optimise UOB group&rsquo s Common Equity Tier 1 capital adequacy ratio by one percentage point, based on its capital position as at Dec 31, 2024.

 

UOB&rsquo s Common Equity Tier 1 capital adequacy ratio stood at 15.5 per cent in Q4. Its liquidity coverage ratio stood at 143 per cent, while its net stable funding ratio was 116 per cent. Loan-to-deposit ratio was 82.7 per cent.

 

Wee is positive in sustaining the lender&rsquo s growth momentum. &ldquo Guided by our disciplined approach to balancing long-term growth with stability, we are poised to further enhance shareholder value in the years to come,&rdquo he added.

The bank is stepping up efforts to enhance productivity

 

UOB remains confident that Asean economies will be resilient and continue to expand, even as the outlook remains uncertain amid ongoing geopolitical tensions and tariff concerns.

 

While US tariff policies will likely hit the region, chief executive Wee Ee Cheong remains &ldquo hopeful&rdquo as he watches for its effects.

 

&ldquo We are closely monitoring developments, and so far Asean continues to be resilient,&rdquo he said at the lender&rsquo s fourth-quarter results briefing on Wednesday (Feb 19).

 

He noted that mega trends &ndash such as supply chain diversification, digitalisation and the green economy &ndash are driving investments into the region.

 

There has also been closer cooperation among Asean countries, such as the Johor-Singapore Special Economic Zone, and integrated cross-border retail payment systems.

 

&ldquo These should help boost intra-Asean connectivity and growth, and reinforce the region&rsquo s position as a key player in the global economy,&rdquo he said.

 

Asean&rsquo s strength should spur growth for UOB, which focuses its strategy heavily in the region.

 

Having acquired Citigroup&rsquo s retail franchise in Malaysia, Thailand, Indonesia and Vietnam, the lender is seen as the one with the most exposure to the region among the three Singapore banks.

 

UOB on Wednesday posted a net profit of S$1.52 billion for Q4 ended Dec 31, 2024, up 8.6 per cent from S$1.4 billion a year earlier.

 

This included S$17 million in one-off expenses from the lender&rsquo s Citigroup integration costs after taxes, which was 81.9 per cent lower than the S$94 million recorded in the same period the previous year.

 

The earnings beat the S$1.48 billion consensus forecast in a Bloomberg survey of six analysts.

 

Net interest income for the quarter was up 2 per cent on the year at S$2.45 billion, driven by loan growth of 5 per cent.

 

Net fee income was stable at S$567 million, although it was down from the last quarter&rsquo s high due to the seasonal slowdown in loan-related and wealth activities.

 

Other non-interest income was up 1.1 per cent on the year at S$443 million, after an exceptional third quarter that benefited from market volatilities.

 

Net interest margin (NIM) for Q4 stood at 2 per cent, down from 2.02 per cent in Q4 2023, and 2.05 in Q3 2024. This was mainly due to lower benchmark rates.

 

Group chief financial officer Lee Wai Fai said the NIM had likely received the full impact of the US rate cuts in 2024, which had translated &ldquo very sharply into the loans repricing&rdquo .

 

He expects the US Federal Reserve will not be as aggressive in 2025, with one cut likely in the later half of the year.

 

&ldquo With that, we hope to maintain at the current 2 per cent level, which means that we have to work very hard on our strategy,&rdquo Lee said.

 

The lender has pivoted its wholesale banking operating model away from just loans to also fees, and has built a strong current and savings account ratio, he said.

 

He also noted that this means the lender has to &ldquo aggressively move towards managing (its) costs&rdquo .

 

Cost management

Core operating expenses increased from investment in franchise growth, with core cost-to-income ratio at 45 per cent.

 

Total allowances rose to S$337 million on higher specific allowance. The non-performing loan ratio remained at 1.5 per cent as at Dec 31, 2024.

 

For 2025, UOB aims to keep its cost-to-income ratio around 42 per cent, and maintain total credit costs at 25 to 30 basis points.

 

Wee said the lender is &ldquo stepping up efforts to enhance productivity&rdquo .

 

He noted that the bank could make full use of artificial intelligence to supplement its productivity and streamline the whole thought process.

 

While Wee did not directly answer questions on job cuts, he added that the bank is trying to upskill its staff and channel them into higher-growth areas.

 

Capital returns

The lender has proposed a higher final dividend of S$0.92 per share for the half-year period, from S$0.85 the year before.

 

This brings the full-year dividend to S$1.80 per share, representing a payout ratio of about 50 per cent.

 

The lender is also proposing a special dividend of S$0.50 per share, paying out S$800 million of UOB&rsquo s surplus capital, over two tranches in 2025.

 

As part of the bank&rsquo s capital distribution strategy, the board has announced a S$3 billion package to distribute surplus capital over the next three years.

 

Apart from the special dividends, the package includes a S$2 billion share buyback programme, where shares will be acquired from the open market and cancelled.

 

The package is estimated to optimise UOB group&rsquo s Common Equity Tier 1 ratio by one percentage point, which stood at 15.5 per cent in Q4.

 

Full year 2024

For the full year, net profit was up 5.8 per cent at a record S$6.05 billion. Excluding one-off Citigroup integration costs, net profit would be up 2.9 per cent at S$6.23 billion.

 

Annualised earnings per share rose to S$3.56 for FY2024, from S$3.34 the year before.

 

Net interest income was stable at S$9.67 billion, driven by healthy loan growth, although it was offset by lower NIMs, which fell to 2.03 per cent from 2.09 per cent.

 

Net fee income was up 7 per cent on the year at S$2.4 billion, amid growth in wealth management fees, card fees and loan-related fees.

 

Other non-interest income jumped 10 per cent on the year to S$2.23 billion. This came amid higher customer-related treasury income, strong hedging demands, and good performance from trading and liquidity management activities.

 

Total allowances were stable at S$926 million, with total credit costs on loans at 27 basis points.

 

For 2025, the lender is aiming for higher total income, a high single-digit loan growth, and double-digit fee increase led by cards, wealth, trade and loan-related fees.