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United Overseas Bank's Profit Jumped 40% in 2021

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United Overseas Bank Ltd (SGX:U11) saw its fiscal year 2021 net profit leap by 40% to 4 billion Singapore dollars ($2.97 billion), driven by strong performance across its franchises and resilient asset quality, according to its earnings results released on Tuesday.

The Singaporean multinational bank also reported total income of S$9.79 billion and net profit of S$4.07 billion for the fiscal year ended Dec. 31, 2021.


Against the backdrop of an improving operating environment and a healthy growth in business activities and consumer spending, the Association of Southeast Asian Nations (ASEAN)-focused bank saw strong performance across customer segments and geographies for the year.

United Overseas Banks ordinary shares are listed on the Mainboard of the Singapore Exchange (SGX). The ordinary shares are also available in the form of American Depository Receipts (ADRs), traded on the over-the-counter (OTC) market under the "UOVEF" ticker. Each ADR represents two underlying ordinary shares. The stock also trades in the U.K. and Germany.

In fiscal 2021, the bank's fee income reached a new high of S$2.41 billion on the back of stellar performance in wealth and loan-related activities. The net interest margin was stable at 1.56% amid a low interest rate environment and with proactive balance sheet management. Asset quality remained resilient with the non-performing loan (NPL) ratio steady at 1.6%, the company noted.

Wholesale Banking income rose 8% to S$4.39 billion on the back of improved business sentiment as the strong client franchise drove robust loan and fee growth from large corporate and institutional clients. Cross-border income grew 10%, with business activities picking up towards the end of the year as clients increasingly tapped the bank's regional connectivity capabilities.

Net interest income rose 6% from a year ago to S$6.39 billion, led by healthy loan growth of 10% with the net interest margin being stable. Net fee and commission income rose 21% to a record S$2.41 billion, driven by double-digit growth in most activities. Loan fees hit a new high of S$698 million, as trade and investment transactions picked up momentum. Wealth management fees grew to a record S$823 million on the back of returning investor confidence. Stronger financial market activity also led to higher fund management fees while credit card fees recovered from a pick-up in consumer spending.

Retail income was sustained at S$4.11 billion as the strong recovery in wealth management and credit card activities helped to offset the impact of thinner margins. In particular, assets under management from high affluent customers reached a new record of S$139 billion, with 57% coming from overseas customers served by the network of wealth management centers in Southeast Asia.

Wee Ee Cheong, United Overseas Banks Deputy Chairman and CEO, said in a statement, "As we enter the third year of the global pandemic, the overall operating environment has stabilized. We achieved a healthy 40% increase in net profit for FY21 as economic growth, business activities and consumer sentiment picked up.

The recent acquisition of Citigroups (NYSE:C) consumer business in Indonesia, Malaysia, Thailand and Vietnam will accelerate its efforts to improve profitability through an expanded customer base and by unlocking business synergies.

During the year, the bank made significant progress on its sustainability strategy. In addition to achieving operational carbon neutrality, the bank rolled out several well-received sustainable financing solutions with the total sustainable financing portfolio reaching S$17 billion in fiscal 2021, well ahead of its 2023 target of S$15 billion. The bank has set a new sustainable financing portfolio target of S$30 billion by 2025.

In the area of sustainable investing, the bank's total assets under management in environmental, social and governance-focused investments grew to S$9 billion during the year.

This article first appeared on GuruFocus.