Building a Premier Regional Bank Analysts Briefing First Half 2003 Results Address by Kuek Tong Au Executive Vice President Corporate Services 1 August 2003 Disclaimer : This material that follows is a presentation of general background information about the Bank s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered with or without professional advice when deciding if an investment is appropriate. UOB Bank accepts no liability whatsoever with respect to the use of this document or its content.
Panel Members Mr Samuel Poon Mr Terence Ong Mr Kuek Tong Au Ms Sim Puay Suang Mr David Loh SEVP, Institutional & Individual Financial Services SEVP, Global Treasury / Asset Management EVP, Corporate Services EVP, Personal Financial Services EVP, Risk Management & Compliance
Agenda 1H03 Operations Review Financial Highlights Moving Forward
Creditable 1H03 Operating Profit despite Challenging Environment Operating profit (before goodwill amortisation & provisions) grew 9.7% on the back of : Uncertainties from Iraq war and SARS outbreak Low interest rate environment Continued downward pressure on loan margin in light of intense competition
Seizing Pockets of Opportunities Tap current favorable interest rate environment to lock in lowcost funds Issued US$1 billion 4.50% Subordinated Notes due 2013 Making inroads in China Set up fund management company to pave way for growth in fund management franchise Enhance CDO capability Launched 3 rd synthetic CDO, increasing UOBAM s total asset under management to US$10.5 billion Entrench relationship in target mass affluent segment Offered groundbreaking FirstZero Home Loan to bring in higher value customers that provide better cross-selling opportunities
Regional Updates UOB Malaysia remains a key contributor, accounting for about 13% of Group profits UOB Radanasin benefited from pick-up in economic activities in Thailand and has turned in profits of THB 112 million (S$4.7 million) UOB Indonesia continues to be profitable and is in good position to ride on the more stable economic and political environment UOB Philippines seeing reduced losses from streamlining and consolidation
Quarter-on-Quarter Profits Declined 2Q03 $m 1Q03 $m Inc / 2Q02 Inc / (Dec) (Dec) $m % % Net Interest Income 532 535 (0.6) 544 (2.2) Non-Interest Income 259 249 4.0 201 29.2 Total Income 791 785 0.8 745 6.2 Less: Operating Expenses 271 266 2.1 250 8.6 Operating Profit before Goodwill and Provisions 520 519 0.2 495 5.0 Less: Goodwill Amortisation 51 51 0.3 45 13.1 Provisions 175 90 94.3 147 19.0 Operating Profit after Goodwill and Provisions 294 378 (22.2) 303 (2.9) Exceptional Item - - - (10) (100.0) Share of Profit of Associates 27 3 863.7 46 (42.0) Profit before Tax & Minority Interests 321 381 (15.8) 339 (5.5) Less: Tax & Minority Interests 81 100 (19.4) 65 24.9 Net Profit After Tax 240 281 (14.5) 275 (12.6)
Performance at a Glance Increase / (Decrease) 1H03 1H02 Amount % Operating Profit before Goodwill and Provisions - $m 1,039 948 91 9.7 Net Profit After Tax (NPAT) - $m 521 591 (70) (11.9) NPAT (excluding goodwill) - $m 623 684 (61) (9.0) Net Customer Loans - $m 59,760 59,289 471 0.8 Non-Performing Loans - $m 5,393 5,971 (578) (9.7) Cumulative Provisions - $m 3,496 3,403 93 2.7 Customer Deposits - $m 66,828 68,079 (1,251) (1.8) Total Assets - $m 107,894 109,096 (1,202) (1.1) ROE (excluding goodwill) - % 9.7 10.6 (0.9)%pt - Expense-to-Income Ratio - % 34.1 35.7 (1.6)%pt - Dividend Rate - % 20.0 15.0 5.0 %pt - NAV Per Share - $ 8.21 8.12 0.09 1.1
Profits Declined amidst Difficult Economic Conditions 1H03 1H02 Inc / (Dec) $m $m $m % Net Interest Income 1,067 1,089 (22) (2.0) Non-Interest Income 509 386 123 31.9 Total Income 1,576 1,475 101 6.9 Less: Operating Expenses 537 527 10 1.8 Operating Profit before Goodwill and Provisions 1,039 948 91 Less: Goodwill Amortisation 102 93 9 9.6 Provisions 265 157 108 68.5 Operating Profit after Goodwill and Provisions 672 697 (25) (3.6) Exceptional Item - (18) (18) (100.0) Share of Profit of Associates 30 94 (64) (68.4) Profit before Tax & Minority Interests 702 773 (71) (9.3) Less: Tax & Minority Interests 181 182 (1) (0.8) Net Profit After Tax 521 591 (70) 9.7 (11.9)
Lower Net Interest Income from Continued Low Interest Rate Environment and Flat Yield Curve Net Interest Income Net Interest Margin ($m) 750 1,089 1,067 (%) 2.75 600 450 545 544 535 532 2.50 2.25 2.22 2.06 2.30 2.26 2.31 300 2.00 150 1.75 0 1H02 1st Quarter 1H03 2nd Quarter 1.50 2000 2001 1H02 2002 1H03
Robust Growth in Non-Interest Income Non-Interest Income (Non-NII) NII) ($m) 600 31.9% 509 500 400 300 200 100 201 23 33 21 124 249 22 20 77 131 36 35 50 138 259 386 35 58 45 247 56 57 127 269 0 2Q02 1Q03 2Q03 1H02 1H03 Non-NII /Total Income : 26.9% 31.8% 32.8% 26.2% 32.3% Fee & Commission Profit fr Sec/Derivatives/FX Dividend & Rental Other Income
Stronger Fee and Commission Income 1H03 1H02 Increase / (Decrease) $m $m $m % Credit card 40 43 (3) (7.1) Fund management 32 39 (7) (18.6) Futures broking & stockbroking 17 31 (14) (43.8) Investment-related 28 12 16 141.4 Loan-related 62 40 22 55.1 Service charges 24 20 4 19.3 Trade-related 54 49 5 10.4 Others 11 13 (2) (17.3) Fee and Commission Income 269 247 22 22 8.5
Effective Cost Management 1H03 $m 1H02 Inc / (Dec) $m % 2Q03 $m 1Q03 Inc / (Dec) $m % Staff Costs 262 271 (3.3) 130 132 (1.0) Other Operating Expenses 275 256 7.3 141 134 5.2 Total 537 527 1.8 271 266 2.1 (%) 40.0 38.0 36.0 34.0 32.0 30.0 39.5 Expense-to-Income Ratio 39.3 35.7 34.9 34.1 2000 2001 1H02 2002 1H03
Higher Provision Charges Necessary Provisions Charged to Income Statement 1H03 1H02 Inc / (Dec) 2Q03 1Q03 Inc / (Dec) $m $m % $m $m % Specific provisions for loans 245 191 28.4 163 82 98.0 Specific provisions for investments and other assets 20 (34) nm 12 8 54.6 Total provisions 265 157 68.5 175 90 94.3 nm : not meaningful
Respectable Net Profit in this Challenging Times ($m) Net Profit After Tax 1H02 Net Profit 591 Positive Factors ($m) 400 316 591 521 Non-interest income 123 Exceptional item 18 Tax and MI 1 300 275 281 240 Negative Factors Provision charges (108) 200 Pre-tax associates profit (64) Net interest income (22) Operating expenses (10) 100 1H02 1H03 Goodwill amortisation (9) 1st Quarter 2nd Quarter 1H03 Net Profit 521
Improved Loans Demand and Diversified Portfolio Net Customer Loans Gross Loans by Industrial Classification ($b) 80.0 Jun-03 60.0 40.0 20.0 0.0 60.9 59.3 58.9 59.2 59.8 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 Housing loans 22.6% Transport, storage and communication Building and Others construction 9.9% 3.2% 12.9% 15.1% Professionals and private individuals 9.6% General commerce 8.8% Manufacturing 17.9% Non-bank financial institutions
Slight Decline in Deposits Customer Deposits Total Deposits by Type ($b) 100.0 Jun-03 80.0 60.0 74.5 68.1 67.9 65.8 66.8 Bankers deposits 21.9% Customer fixed deposits 53.3% 40.0 20.0 0.0 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 24.8% Customer savings and other deposits % of Total Deposits 80.4% 77.4% 77.9% 75.3% 78.1%
Better Utilisation of Surplus Funds (%) 100.0 Loans / Deposits Ratio 95.0 90.0 87.1 86.7 89.9 89.4 85.0 81.8 80.0 75.0 70.0 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03
Improved Non-Performing Loans (NPLs) Ratio Total NPLs ($m) 5,968 5,971 5,679 5,669 5,393 ($m) (%) 6,000 3,851 4,039 3,619 3,615 3,386 12 10 4,000 9.3% 9.5% 9.0% 8.9% 8.4% 8 2,000 0 497 384 447 445 425 1,620 1,548 1,613 1,609 1,582 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 6 4 2 Loss Doubtful Substandard NPLs / Gross Customer Loans
Reduction in NPLs across Regions Total NPLs ($m) 5,968 5,971 5,679 5,669 5,393 ($m) 6,000 4,000 187 172 362 227 1,600 1,555 104 103 182 173 1,458 1,510 97 181 1,431 2,000 3,819 4,017 3,935 3,883 3,684 0 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 Singapore 5 Regional Countries Greater China Others
Reduction in NPLs across Major Sectors Jun-03 Dec-02 Jun-02 Jun-03/ Dec-02 Jun-03/ Jun-02 $m $m $m $m $m Transport, storage and communication 123 124 99 (1) 24 Building and construction 770 843 1,108 (73) (338) Manufacturing 875 874 906 1 (31) Non-bank financial institutions 1,016 1,029 1,076 (13) (60) General commerce 755 769 761 (14) (6) Professionals and NPLs By Industrial Classification Inc / (Dec) private individuals 972 1,014 1,006 (42) (34) Housing loans 612 668 588 (56) 24 Others 206 294 404 (88) (198) Total NPLs * 5,329 5,615 5,948 (286) (619) * Excluding debt securities
Improved NPLs Ratio for Major Sectors NPLs Ratio By Industrial Classification Inc / (Dec) Jun-03 Dec-02 Jun-02 Jun-03/ Dec-02 Jun-03/ Jun-02 % % % % pts % pts Transport, storage and communication 6.1 6.0 4.9 0.1 1.2 Building and construction 9.5 9.2 11.5 0.3 (2.0) Manufacturing 15.7 16.2 16.3 (0.5) (0.6) Non-bank financial institutions 9.0 9.5 9.8 (0.5) (0.8) General commerce 12.4 12.4 12.1-0.3 Professionals and private individuals 10.2 10.9 11.0 (0.7) (0.8) Housing loans 4.3 4.8 4.3 (0.5) - Others 3.3 5.3 7.6 (2.0) (4.3) Total NPLs* / Gross Customer Loans 8.4 9.0 9.5 (0.6) (1.1) * Excluding debt securities
Cumulative Provisions Maintained Despite Drop in NPLs Total Provisions ($m) 3,334 3,403 3,504 3,531 3,496 ($m) (%) 3,500 3,000 1,435 1,428 1,425 1,427 1,427 3.0 2,500 2,000 2.3% 2.4% 2.4% 2.4% 2.3% 2.0 1,500 1,000 500 1,899 1,975 2,079 2,104 2,069 1.0 0 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 0.0 Specific Provisions General Provisions GP / Customer Loans (net of SP)
Increase in Provision Coverage Cumulative Provisions / Total NPLs Ratio Cumulative Provisions / Unsecured NPLs Ratio (%) (%) 66 64.8 150 64 62 61.7 62.3 140 136.6 138.3 137.3 60 58 56 55.9 57.0 130 120 132.2 134.5 54 52 110 50 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 100 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03
Strong Capital Position Capital Adequacy Ratio (BIS) ($b) (%) 90.0 25 60.0 18.5 17.2 15.3 15.4 17.8 15.4 20 15 30.0 11.8 11.8 12.2 12.4 12.3 10 Risk Weighted Assets 5 0.0 0 Dec-01 Jun-02 Dec-02 Mar-03 Jun-03 Risk Weighted Assets Tier 1 CAR Total CAR Total CAR including US$1 billion 4.50% Subordinated Notes Total CAR excluding US$1 billion 4.50% Subordinated Notes
Higher Dividend Payout to Reward Shareholders (%) 60 50 18.8% 40 30 25% 25% 25% 25% 20 10 12% 8% 15% 15% 15% 20% 0 1999 2000 2001 2002 1H03 Dividend Amount $416m $316m $426m $720m $245m Dividend Payout Ratio 54.7% 34.6% 46.0% 67.7% 47.1% Interim Final Dividend in Specie Special
In Summary 1H03 1H02 Inc / (Dec) 2Q03 1Q03 Inc / (Dec) Net Profit After Tax $521m $591m (11.9)% $240m $281m (14.5)% ROE (excluding goodwill) 9.7% 10.6% (0.9)% pt 9.0% 10.4% (1.4)% pt Expense to Income Ratio 34.1% 35.7% (1.6)% pt 34.3% 33.8% 0.5% pt NPL/Gross Customer Loans 8.4% 9.5% (1.1)% pt 8.4% 8.9% (0.5)% pt Dividend Rate 20.0% 15.0% 5.0% pt 20.0% - 20.0% pt
Moving Forward Receding event risk, both SARS and Iraq war Signs of pick-up in the operating environment Region will be key to our future, remain confident of region s fundamental prospects and long-term growth potential
Focused Business Strategy Strengthen Domestic Position Continue to strengthen market positions in Consumer and SME markets Reinforce fee-based activities Prudent cost management Focused Regional Expansion Establish Strategic Partnerships Continue to grow existing operations organically Seize opportunities as and when they arise Prepared to move aggressively, but in a calculated and disciplined manner Build partnerships via strategic alliances and joint ventures Continue to build skill-sets and adopt international best practices Further develop cross-selling opportunities by broadening the range of products and services Invest for the Future Continue to invest in technology, infrastructure, customer franchise and human resources for long term growth Continue to explore opportunities in new markets and products
The Vision To be a premier bank in the Asia-Pacific region Committed to providing quality products and excellent customer service