UOB’s FY 2018 performance can be analyzed via income type and business segment. The bank holds three types of income: Net Interest Income, Net Fee and Commission Income, and Other Income. The first two experienced a positive growth while Other Income suffered a drop. Looking at business segments, UOB’s Group Retail, Group Wholesale Banking and Global Markets segments all performed well, while its Others segment saw a decline. The report will also take a brief look at the quarter-on-quarter performance for UOB’s Q4 2018 results.

Performance Drivers (Positive Factors)

• Net interest income

UOB’s FY 2018 net interest income increased 13% to SGD 6.22 billion as a result of broad-based loan growth and higher net interest margin. Net interest margin rose five basis points to 1.82%, in line with the rising interest rate environment.

• Net fee and commission income

Net fee and commission income grew by 5% to SGD 1.97 billion – attributable to the strong performance in loan-related, credit card, trade-related and fund management fees.

• Group Retail Segment

Profit before tax for UOB’s Group Retail segment grew 4% to SGD 1.83 billion in FY 2018, while total income rose 4% to SGD 3.95 billion. This was mainly driven by net interest income which increased 7% on the back of healthy volume growth and deposit margin improvement. On the flip side, non-interest income was maintained at about the same level, while expenses went up by 7% as a result of higher staff costs and investments in digital capabilities.

• Group Wholesale Banking Segment

UOB’s Group Retail segment saw profit before tax surged 96% to SGD 2.82 billion as credit costs eased in a benign credit environment. Meanwhile total income grew 11% to SGD 3.94 billion. This was attributed to a double-digit growth in volume and margin improvement for net interest income – as a result of rising interest rates. In addition, non-interest income rose 5% to SGD 1.11 billion from loan-related fees, trade and investment banking. Similar to Group Retail, expenses for this segment increased 16% due to higher staff costs and investments in digital capabilities.

• Global Markets Segment

Profit before tax for Global Markets jumped 16% to SGD 218 million and total income rose 6% to SGD 465 million. This was largely driven by favorable movements in foreign exchange and rates. Meanwhile, expenses dropped by 3% to SGD 245 million.

Performance Drivers (Negative Factors)

• Other non-interest income

UOB’s FY 2018 other non-interest income decreased 20% to SGD 930 million as a result of unrealized mark-to-market on investment securities, as well as lower gains from sale of investment securities.

• Others Segment

UOB’s Others business segment comprised non-banking activities and corporate functions. This segment recorded a loss of SGD 42 million in FY 2018 – compared to the net profit of SGD 819 million in FY 2017. This wide gap was chiefly due to the gain from sale of equity investments and reversal of allowances for non-impaired assets made last year.

• Weaker Q4 2018 earnings

Although the focus is on full-year financial results, it should be noted that UOB experienced a quarter-on-quarter drop in its Q4 2018 earnings. The bank registered lower net fee income due to lower wealth management and loan-related fees on subdued market sentiments. Higher allowances also had to be made for impaired assets principally in Singapore and Indonesia. Nevertheless, UOB’s weakness in its Q4 2018 earnings was widely expected by analysts – in view of the strong headwinds created from heightened geopolitical risks and volatile financial markets.