United Overseas Bank - UOB Kay Hian 2024-10-14: Building The Future Of ASEAN

• UOB aims to achieve ROE of 14% by 2026 through:
  1. increased contribution from ASEAN 4 countries (namely Malaysia, Thailand, Vietnam and Indonesia) to 30% of total income,
  2. increased contribution from non-interest income to 37% of total income, driven by wealth management, trade and customer flow for treasury products, and
  3. - Read this at SGinvestors.io -
• UOB will benefit from growth within ASEAN from relocation of supply chains and strengthening of regional currencies.

Setting sight on loftier goal.

• UOB (SGX:U11) aims to achieve ROE of 14% by 2026 (1H24: 13.7%). Management foresees 10 rate cuts in 2H24, 2025 and 2026. The growth in business volume and fee income would more than offset the negative impact from NIM compression. The ROE target of 14% will be achieved through:
  1. - Read this at SGinvestors.io -
  2. contribution from non-interest income increasing to 37% of total income (1H24: 32%), driven by growth from wealth management, trade finance and customer flow for treasury products.
  3. cost-to-income ratio (CIR) improving to 40% (1H24: 41.8%).
• UOB aims to achieve positive JAWS with total income expanding at a CAGR of 4%, faster than the increase in operating expenses at a CAGR of 3%. Cost mix is expected to shift from staff to technology. UOB plans to offshore back and middle office functions, including card centre and compliance, to Kuala Lumpur, Malaysia.
• The new Innovation Hub 2 (IH2) is a full-fledged technology delivery centre providing development, applications and infrastructure support. IH2 spans across five floors with more than 1,000 staff and a total floor area of 74,000sf at The Gardens North Tower in Mid Valley City.

ASEAN benefitting from trade conflict and rate cuts.

• Read more at SGinvestors.io.

Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2024-10-14 SGinvestors.io

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