Despite the uncertain outlook amid ongoing geopolitical tensions and the impact of tariff issues, UOB remains confident that ASEAN economies will remain resilient and continue to expand.

Although U.S. tariff policies may impact the region, CEO Wee Ee Cheong remains "hopeful" as he monitors the effects.

Speaking at the bank's fourth-quarter earnings briefing on Wednesday (February 19th), he said, "We are closely watching developments, and so far, ASEAN has remained resilient."

He noted that megatrends such as supply chain diversification, digitalization, and the green economy are driving investment in the region.

Cooperation among ASEAN nations has also strengthened, such as the Johor-Singapore Economic Special Zone and integrated cross-border retail payment systems.

He said, "These should help boost connectivity and growth within ASEAN and solidify the region's position as a key player in the global economy."

The strength of ASEAN will stimulate UOB's growth, as the bank's strategic focus is primarily concentrated in the region.

The bank's acquisition of Citigroup's retail businesses in Malaysia, Thailand, Indonesia, and Vietnam positions it as the Singapore bank most closely tied to the region.

UOB reported on Wednesday 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. This included a one-time after-tax expense of S$17 million for the bank's integration costs with Citigroup, 81.9% lower than the S$94 million in the same period last year.

The earnings exceeded the S$1.48 billion consensus estimate from a Bloomberg survey of six analysts.

Driven by a 5% increase in loans, net interest income for the quarter rose 2% year-on-year to S$2.45 billion.

Net fee income remained stable at S$567 million, though it declined from the previous quarter's high due to seasonal slowdowns in loan-related and wealth activities.

Other non-interest income rose 1.1% year-on-year to S$443 million in the third quarter, influenced by market volatility.

The net interest margin (NIM) for the fourth quarter was 2%, down from 2.02% in the fourth quarter of 2023 and 2.05% in the third quarter of 2024, primarily due to declining benchmark interest rates.

Group CFO Lee Wai Fai said the NIM may have fully felt the impact of U.S. rate cuts in 2024, which "very sharply led to loan repricing."

He expects the Federal Reserve to cut rates less aggressively in 2025, with possibly one rate cut in the second half of the year.

Lee said, "We hope to maintain the current level of 2%, which means we have to work very hard on our strategies."

He noted that the bank has shifted its wholesale banking operating model from pure lending to fee-based services and built a strong current and savings account ratio.

He also pointed out that this means lenders must "take active steps to manage costs."

Cost Management

Core operating expenses increased due to investments in franchise growth, with a core cost-to-income ratio of 45%.

Total provisions rose to S$337 million due to higher specific provisions. The non-performing loan ratio remained at 1.5% as of December 31, 2024.

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

Wee said the bank is "stepping up efforts to improve productivity."

He noted that the bank can fully leverage artificial intelligence to supplement productivity and streamline thought processes.

While Wee did not directly address questions about layoffs, he added that the bank is trying to upskill employees and redirect them to higher-growth areas.

Capital Returns

The bank proposed raising its interim dividend to S$0.92 per share, up from S$0.85 last year.

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

The bank also proposed a special dividend of S$0.50 per share and a S$800 million UOB residual capital distribution in two tranches in 2025.

As part of the bank's capital allocation strategy, the board announced a S$3 billion plan to distribute residual capital over the next three years.

In addition to the special dividend, the plan includes a S$2 billion share buyback program to repurchase shares from the open market and cancel them.

The plan is expected to increase UOB Group's Common Equity Tier 1 capital ratio by one percentage point, which stood at 15.5% in the fourth quarter.

Full-Year 2024

Full-year net profit rose 5.8% to a record S$6.05 billion. Excluding one-time Citigroup integration costs, net profit would have increased 2.9% to S$6.23 billion.

Annualized earnings per share for FY2024 increased to S$3.56 from S$3.34 the previous year.

Net interest income remained stable at S$9.67 billion, supported by healthy loan growth, though offset by a lower net interest margin (down from 2.09% to 2.03%).

Net fee income rose 7% year-on-year to S$2.4 billion, driven by growth in wealth management fees, card fees, and loan-related fees.

Other non-interest income increased 10% year-on-year to S$2.23 billion, supported by higher customer-related treasury income, strong hedging demand, and robust trading and liquidity management activities.

Total provisions remained stable at S$926 million, with total credit costs for loans at 27 basis points.

Looking ahead to 2025, the bank aims to achieve higher total income, high single-digit loan growth, and double-digit fee growth led by credit cards, wealth, trade, and loan-related fees.