KUALA LUMPUR: Singapore’s homegrown United Overseas Bank (UOB) wants to reduce its reliance on the city-state and plans to generate half its income from its other South-East Asian markets by 2026, says head of group personal financial services Jacquelyn Tan.
Tan said prior to the completion of the acquisition of Citigroup’s consumer banking operations in Malaysia, Thailand, Vietnam and Indonesia in 2023, Singapore contributed 64% to UOB’s income, while the region, referring predominantly to Malaysia, Thailand, Indonesia and Vietnam, contributed the other 36%.
“After the acquisition, Singapore contributes 57% of the group’s income, and 43% of income is derived from the region. By 2026, we expect this income mix to be about 50:50 between Singapore and the region, two powerhouses firing away.
“Outside Singapore, in terms of the order of income contribution would be Thailand, Malaysia, Indonesia and Vietnam,” she said in a presentation during the UOB Corporate Day 2024 event here yesterday.
Tan said post acquisition, the group’s mix has been diversified and reshaped across income, geography and assets.
She noted that with the Citigroup acquisition, the majority of income or 80% of the business is in the unsecured lending business. Currently, unsecured lending income contributes 30% of the group’s business.
“What that (the acquisition) has done is it has grown our unsecured lending income mix from 21% to 29% in 2023. We saw strong net interest income with rates toppish as it is.
“This, coupled with our deposit-leverage growth, together with our wealth management business, both deposit as well as wealth management, now contributes to close to 60% of our income mix in 2023.
“The remaining 10% is in secured lending, which is dominantly in mortgages,” she said.
Looking ahead, Tan said the group’s engines of growth are in wealth, current account savings accounts (Casa), cards and its regional markets (Thailand, Malaysia, Indonesia and Vietnam).
“In terms of the income point of view, from 2023 to 2026, we expect our income growth to grow at a compound annual growth rate (CAGR) of 9%.
“Unsecured lending, as well as wealth, we expect to see a double-digit growth, where our unsecured lending will grow closer to 35% in terms of income contribution, as well as our deposit and wealth management to be closer to 60% to 65% in terms of income contribution.
“From a balance sheet point of view, we expect deposits to grow, fuelled by Casa. Our Casa balance is expected to grow at a CAGR of 12% in the next three years, and we expect our Casa mix to get closer to 60%,” she said.Tan said with the revenue synergies the company sees, the group also expects cost synergies to come through as well.
“Cost synergies from better efficiencies, discretionary spend, target operating model for the future of the business, technology as well as infrastructure, providing process optimisation or better productivity and even branch level optimisation.
“As such, we would expect our cost-to-income ratio to drop from 51% now to 45% by 2026 in group personal financial services and Singapore to be at a cost efficiency of 35%, and our region to drop from 74% to 55% in 2026,” she said.
