I have wanted to attend UOB AGM this Thursday, but an appointment to change my faulty gas water heater means I would have to give it a miss. As such, I decided to do spend a bit more time to look at their latest annual report. Also, similar to what I have written for OCBC and DBS earlier, I pulled out the past few years data to see if I can glimpse anything from the numbers.
Before sharing the numbers though, I will like to share what captured my attention qualitatively. I could not remember if I browsed through their corporate milestones last year, but this year I decided to look through this section. And I would say that my perspective of them changes a bit.
From the time I first bought their shares in 2022, I always perceived that they are the most conservative among the three local banks. However, now that I looked through their milestones, I think a better way to think about UOB is that they are the most prudent when it comes to dealing with the finance. In terms of expanding to new markets or having new initiatives, I would say that they are actually quite adventurous.
As seen from the above snapshots, they have expanded to different markets and achieved many first over the years! It seems like the group does live by the tagline, Balancing Growth with Stability for the Long Term.
Chairman refers to this as their longstanding focus; CEO refers it to their commitment; and it appeared as part of their strategic priorities in previous annual reports. No matter how you call it, this appears to be the group’s guideline when they deal with their expansion and finances.
And that should guide our expectation if we choose to invest in UOB. It’s a bank that will grow at a steady pace and one that is prudent with their finance. So while there will be no bonus share or dividend guidance, it is very likely that they can sustain and increase their dividend in the long term.
A look at the past 6 years data shows that UOB has grown both their net interest income and non-interest income. As mentioned before, while net interest income is affected by net interest margin (NIM), it is not the only factor. For example, NIM for FY2018, FY2019 and FY2022 were similar but the net interest income was much higher in FY2022. In fact, while FY2019 NIM was slightly lower than that of FY2018, its net interest income was 5% higher.
Not forgetting the non-interest income. We can see that there is already a positive impact from the acquisition of Citigroup’s consumer banking business in Malaysia, Indonesia, Thailand and Vietnam last year. And that was only with the integration of Malaysia and Indonesia businesses, including the one-off acquisition cost.
Hence both net interest income and non-interest income contributed to the bank’s top and bottom line growth over the past 5 years. At high single digit percent, the growth rate is not impressive as compared to growth companies, but the thing is they are not a growth company!
Accordingly, dividend has grown from $1.20 ($1.00 if exclude special dividend) in 2018 to $1.70 last year. Wearing the hat of an income investor, I will be delighted to get such growth. It’s like getting a pay rise of about 10% every year!
More information
I was hoping to gain more insights from management response to substantial and relevant questions by shareholders. But lo and behold, there are only two questions!
- Has the Citigroup acquisition been successful? How has it contributed to the Operating Income in 2023? Is the acquired business fully reflected in the numbers and can we expect any further upside in future?
- Which country is the main contributor to “Other Asia Pacific”? What is the proportion (% of operating income)?
And as expected, there is nothing much new to learn from the responses. What makes the search more worthwhile is that I came across last year’s AGM minutes, which means I can look forward to management’s response to various questions asked during tomorrow’s AGM.
Also, I came across a presentation from the event SIAS Corporate Connect Webinar, dated 12 Mar 2024. There are good visuals from the presentation to show how the bank has grown over the years.
Not sure about you, but looking at their track record, it does give me confidence that the bank is going to continue to do well in the foreseeable future.
And of course if they can continue to do well, we can expect higher dividend in the coming years!
You can access the full presentation here.
I am holding on to my current stake.