CEO's Message on UOB Group 9M11/3Q11 Results

Dear Investors

UOB Group (the “Group”) recorded a net profit after tax of S$522 million for the third quarter ended 30 September 2011 (“3Q11”), 17.9% lower than the previous quarter, mainly due to weaker trading and investment income in a volatile environment. The Group’s core business remained resilient as we continue to improve our capabilities, expand our product offering and intensify our presence in the region. Loans registered a 7.0% quarter-on-quarter (“qoq”) increase on the back of a strong loans pipeline, led by the region, which grew 12.7% qoq. Year-to-date, our key regional markets recorded strong loans growth of 30.3%, outpacing Singapore’s growth of 19.4%, bringing the Group’s year-to-date loans growth to 22.0%.

Net interest income rose 0.2% over the last quarter as strong loans growth was partially offset by a slight decline in NIM to 1.89% amidst competitive pressure especially on the deposits front. The Group’s Loan to Deposit ratio remained stable at 86.9% as deposit collection efforts kept pace with loans growth.

Non interest income fell 14.9% mainly due to adverse market conditions in 3Q11. Fee income dipped slightly by 4.2% but registered a 13.9% increase year-on-year. Trading & investment income declined 31.0% qoq as we continued to pare down our investment securities portfolio amidst deteriorating market conditions. We will continue to intensify our cross-selling efforts to reinforce fee income growth and improve customer driven non-interest income, particularly in the region.

The Group’s asset quality remained robust, with non-performing loans (“NPL”) ratio stable at 1.5% as at 30 September 2011 and total loan charge-off rate flat at 30bps. Impairment coverage remained high at 116.5% as we continued to set aside collective impairment to strengthen our balance sheet. Expenses were up 3.1% qoq as the Group continued to invest in its regional franchise. Coupled with a lower income base, cost-to-income ratio correspondingly rose to 46.4%. Our capital position remained strong with Core Tier 1 at 12.3%, Tier 1 at 14.0% and Total CAR 17.5% as at 30 September 2011.

Looking ahead, the outlook for global growth remains patchy and hinges upon policy responses from the West. We have seen measures rolled out in the past week in an attempt to resolve the European debt crisis. We are monitoring developments closely, especially the follow-through and implementation process. This would determine if Asia goes through another financial shock, or a moderate economic slowdown.

While external conditions are beyond our control, focusing on the fundamentals will help ensure that we maintain a strong balance sheet to support our customers and to ride out credit cycles. Today, liabilities are banks’ greatest assets, amidst growing focus on funding. The turbulent global environment gives new meaning to the strength of Asian commercial banking. Our robust capital and liquidity position, diversified portfolios as well as strong deposit-funded franchise will help ensure that we are well-positioned to navigate through uncertain times. Since 2008, we have further strengthened our balance sheet including our liquidity and funding positions. These initiatives will enhance our capability and flexibility to capture growth opportunities ahead.

I am confident that we are well-positioned to achieve our aim of becoming a premier regional bank.

Wee Ee Cheong
Deputy Chairman & Chief Executive Officer
02 November 2011