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At AGM, UOB stays committed to sustainable dividend growth

UOB looks to maintaining earnings growth to support dividend growth model

For around an hour, United Overseas Bank U11’s chairman Wong Kan Seng, group CEO Wee Ee Cheong, group CFO Lee Wai Fai, group chief risk officer Chan Kok Seong and other C-suite executives answered questions from a handful of the 900 shareholders who attended the bank’s FY2023 AGM held on April 18.

In his opening speech, Wee thanked shareholders for their messages of support following the sad demise of his father Wee Cho Yaw. Among the topics he touched on was that UOB would be paying out 85 cents per share for 2HFY2023, or $1.70 for the full year.

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“We did well last year. Our core net profit rose 26% to new record of $6.1 billion. Our asset quality is stable and our balance sheet remains strong.

"To reward our shareholders the board has recommended a final dividend of 85 cents. Together with an interim of 85 cents, the total dividend is $1.70 and a payout ratio of 50%. We are committed to maintainting this ratio supported by sustained earnings growth,” says Wee.

He also confirmed that the 50% payout ratio is premised on the bank’s common equity tier 1 (CET1) ratio staying between 12.5% to 13.5%.

CFO Lee further expounded on how the future might look for UOB’s earnings.

“We hope to maintain a 2% margin (for net interest margins), to look at customer needs and how we can fund them. An ROE of 14% is a decent target over the longer term.

"We can sustain asset growth of 8% a year [over the cycle], which translates into [pre-provisioning operating] profit growth of 8% to 10%, and we can maintain a dividend payout ratio of 50%. It’s a steady model, it’s not a volatile mode,” he elaborates adding that the model is a steady dividend growth model," says Lee.

There were questions on AI and its use in banking; concerns of dedollarisation, interest rates, China, Chinese property, Hong Kong property, Chinese developers and so on.

A question on how UOB would look in five years, Wee suggested that it would be a more regional bank. UOB has aspirations to be the best trade bank in Asean with a 5% share of the US$3.8 trillion market

“We’d like to see connectivity. The investment we’ve put in place is to provide solutions for our customers. We already have a footprint in Asean, spending a lot of time and resources to connect activity within Asean.

"At the moment, we still have a very small market share in these activities. In the next five years, if we do it well, we should be able to penetrate and win competition [from] the big domestic banks in the respective Asean countries.

"I’ll continue to stay focused because banking is highly regulated, and capital intensive. We have to preserve capital, manage risk well. With the amount of money we spend on tech, if we cast our net too wide, we could get into trouble,” Wee explains.

Wee assures shareholders there's a sound succession plan in place.

"I personally spend much time and effort to grow our own timber to build on the bank’s legacy and to shape it for the future. The future leadership will continue to carry on this DNA, anchor on our values and honour, unity, commitment and enterprise," he says.

 

 

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