UOB - DBS Research 2025-02-20: Long-awaited Capital Distribution Strategy

• UOB (SGX:U11)'s 4Q24 revenue below consensus by 4% while net profit ahead by 1%.
  • Revenue came in at S$3,461mil (+1% y-o-y, -10% q-o-q), while net profit was S$1,523mil (+9% y-o-y, -5% q-o-q).
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Net interest income (NII) at S$2,451mil (+2% y-o-y, flat q-o-q)

• Net interest income (NII) at S$2,451mil (+2% y-o-y, flat q-o-q) was driven by asset growth, offset by impact from interest rate cuts as 4Q24 NIM moderated to 2.00% on lower benchmark rates.
• Operating costs increased 6% y-o-y, declined 2% q-o-q to S$1,558mil, leading to a cost-to-income (C/I) ratio excluding/including one-off Citi integration costs, of 45.0%/45.6% (3Q24: 41.5%/42.4%).

Non-interest income flat y-o-y, declined 26% q-o-q.

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• Other non-interest income of S$443mil (+1% y-o-y, -40% q-o-q) eased from an exceptional 3Q24 that had benefitted from market volatilities.

Lower credit costs at 25bps; NPL stable at 1.5%.

• 4Q24 credit cost lower q-o-q at 25bps (3Q24: 34bps). General allowance performing loans coverage decrease q-o-q to 0.8%. Total loan allowances of S$212mil, 25bps (3Q24: S$281mil, 34bps), including general allowances (stage 1+2): -S$227mil, -27bps (3Q24: -S$15mil, - 2bps) and specific allowances (stage3): S$439mil, 52bps (3Q24: S$296mil, 36bps) saw an uptick driven by 2 accounts in the US which saw a sharp decline in collateral values.
• New NPA formation was higher at S$514mil (3Q24: S$212mil, average of S$322mil for last 4 quarters). NPL ratio remained stable at 1.5% (flat y-o-y and q-o-q).

A S$3 billion package to return surplus capital over 3 years

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Rui Wen LIM NA DBS Group Research | Singapore Research Team DBS Group Research | https://www.dbs.com/insightsdirect/ 2025-02-20 SGinvestors.io

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