The board of United Overseas Bank (UOB) has announced a S$3 billion plan to distribute residual capital over the next three years, aiming to reduce excess capital.

The bank proposed a special dividend of S$0.50 per share in two tranches in 2025—distributing S$800 million of UOB's residual capital.

The company also introduced a S$2 billion share buyback program to repurchase shares from the open market and cancel them over the next three years.

UOB reported on Wednesday (February 19th) that its net profit for the fourth quarter ending December 31, 2024, was S$1.52 billion, an 8.6% increase from S$1.4 billion in the same period last year.

UOB CEO Wee Ee Cheong said at the bank's fourth-quarter earnings briefing on Wednesday, "Our disciplined approach to pursuing long-term growth in a steady manner has served us well, and we are confident in enhancing shareholder value in the coming years."

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

Previously, analysts and investors had been focusing on Singapore banks' capital return plans, as all three banks have excess capital due to Basel IV reforms.

As of December 2024, UOB's Common Equity Tier 1 (CET-1) capital adequacy ratio stood at 15.5%. Factoring in Basel IV reforms, its fully loaded CET-1 ratio would be 15.4%.

UOB Group CFO Lee Wai Fai said, "With a strong capital position, we are confident in continuing to deliver consistent and stable returns to shareholders."

He noted that the bank is committed to reducing its CET-1 ratio to 14%.

After the distribution plan, UOB may have several hundred million dollars of residual capital left, although "that number could grow as the base expands."

Lee added, "If profitability is stronger, then technically, the CET-1 ratio will be higher because you are increasing the base."

He also pointed out the need to retain capital to drive growth, especially as the bank remains confident in ASEAN's prospects. "We believe there is still some work to be done in the region, and we believe we need risk-weighted assets to drive this regional growth vision."

DBS Bank was the first among local banks to return excess capital. In November 2024, DBS surprised the market by announcing a S$3 billion share buyback program alongside its third-quarter earnings. This was in addition to DBS' regular dividends and previously announced special dividends and scrip dividends.

DBS Bank supplemented this at its fourth-quarter earnings briefing last week, stating that it would distribute a capital return dividend of S$0.15 per share quarterly. The dividend will be paid in FY2025, with similar amounts to be distributed over the next two years.

As for OCBC, its management previously stated that it prefers to return excess capital to shareholders through dividends rather than share buybacks.

The company also aims to retain its excess capital as a reserve to support franchise liquidity and potential inorganic growth opportunities. OCBC will announce its fourth-quarter results on February 26.