CEO’s Message on UOB Group
FY17/4Q17 Results

Dear Investors,

The UOB Group (the "Group") registered net profit after tax of S$883 million in the third quarter of 2017 (3Q17). This represents a 5% increase over the last quarter, supported by a broad-based income growth.

Net interest income grew 4% to S$1.4 billion this quarter, backed by healthy loan growth of 3% quarter-on-quarter, while net interest margin expanded by 4 basis points to 1.79%. Fee income outpaced overall growth, rising 7% to S$551 million on higher loan-related and wealth management activities. Lower net gains from investment securities resulted in overall non-interest income remaining at S$830 million. Growth in top-line, combined with cost management discipline, led to cost-to-income trending down to 43.5%.

Asset quality headwinds continued to be confined within the oil and gas sector, which resulted in an uptick in new non-performing loan (NPL) formation and specific allowance this quarter. Despite this, our balance sheet remains robust, with an NPL ratio of 1.6% and a healthy general allowance buffer of S$2.6billion, representing 1.1% of gross loans. Coupled with specific allowances, total impairment coverage came in at 108% of NPL, or 236% after taking collateral into account. Apart from the oil and gas sector, the asset quality of our overall portfolio remains stable and we believe specific allowance for this year should be lower than last year.

Our funding and capital positions are robust. Loan-to-deposit ratio was healthy at 85.8%, and average all-currency liquidity coverage ratio for 3Q17 was at 142%. The Group’s fully-loaded Common Equity Tier 1 Capital Adequacy Ratio stood at 13.8% and leverage ratio was 7.7% as of 30 September 2017, well above minimum regulatory requirements. Backed by our strong fundamentals, our inaugural USD-denominated perpetual capital securities issued in October 2017 met with strong demand from a diverse mix of investors, both across investor types and geographies.

Amid signs of pick-up in the global economy and driven by higher revenues from our diversified banking franchise, we have achieved our strongest quarter yet. Despite ongoing uncertainties in the external environment, we believe in Asia’s long-term prospects which are backed by its favourable growth drivers. We continue to invest in capabilities to support our customers’ regionalisation ambitions and rising wealth needs.

On behalf of the management, thank you for your continued support as our valued investors.

Wee Ee Cheong
Deputy Chairman & Chief Executive Officer
3 November 2017