UOB H1 2023 Earnings: Singapore Bank Hikes Dividend by 40%

July 27, 2023

UOB buy Southeast Asia

Earnings season for Singapore’s big banks is undoubtedly the highlight of the local earnings season.

That’s because the banks here make up a significant portion of the benchmark Straits Times Index (STI). And recently, they’ve been pulling in record profits on the back of higher interest rates.

First up for the Q2/H1 2023 bank earnings showcase was ASEAN-focused United Overseas Bank Ltd (SGX: U11), better known as UOB.

Many investors have been focused on whether banks could continue their impressive earnings streak given the US Federal Reserve’s hiking cycle looks to be coming to an end.

UOB reported its Q2 2023 and H1 2023 numbers before the market opened today (27 July).

For dividend and bank stock lovers, here are some of the key highlights from UOB’s latest earnings numbers.

UOB second-quarter core net profit hits S$1.5 billion

UOB’s Q2 2023 core net profit hit an impressive S$1.5 billion, up 33% year-on-year but a slight deceleration, down 4%, from Q1 2023.

UOB’s Return on Equity (ROE) for Q2 2023 was an impressive 14.1% but its net interest margin (NIM) moderated slightly to 2.12% during the period (see below).

But the bank’s net interest income (NII) benefitted from a slightly longer calendar quarter to rise 1% quarter-on-quarter to S$2.43 billion.

UOB H1 2023 NII

Source: UOB Q2 2023 and H1 2023 earnings presentation

UOB’s interim dividend comes in strong

Dividends have been a focus for investors in Singapore banks given how flush with cash they have been. UOB didn’t disappoint with its interim dividend per share (DPS) for H1 2023, which came in at 85 Singapore cents.

That was an impressive 41.5% year-on-year increase versus the DPS that was paid out for H1 2022.

Even on a half-on-half basis, the DPS was up 13.2% versus the FY2022 final DPS of 75 Singapore cents.

As evidence of how strong profit growth has been, even with the substantially higher H1 2023 dividend, UOB’s dividend payout ratio stayed constant at 49% (see below).

UOB H1 2023 dividend

Source: UOB Q2 2023 and H1 2023 earnings presentation

Weaker fee income but digital acquisition grows

It wasn’t all rosy for UOB, though, as the bank’s fee income fell 5% quarter-on-quarter in Q2 2023 to S$524 million.

This was attributed to softness in loan/trade-related fees and weakness in wealth management fees (given the cautious investor sentiment).

There was a record quarter in Q2 2023 for the bank’s Trading & Investment (T&I) income though as that hit S$478 million. UOB’s cost-to-income ratio (CIR) was stable at 40.9%.

Meanwhile, UOB is also continuing to grow its digital presence via its UOB TMRW app. The bank shared that it has over 7 million retail customers, 78% of which are digitally enabled.

It also saw a 47% year-on-year increase in new-to-bank customers (56% of which were digitally acquired) in H1 2023 versus the same period last year.

Solid numbers but watch for pockets of weakness

While UOB did deliver an impressive set of Q2 2023 and H1 2023 results, beating expectations, management did guide down fee growth – from double-digit expansion for FY2023 previously to high-single-digit now.

UOB CEO Wee Ee Cheong also stated that the bank expects its one-time costs from its Citi acquisition will substantially roll off by the end of this year.

UOB shares initially reacted positively to the beat at the market open but gave up some of those gains and ended the day up 0.8%. So far in 2023, UOB’s share price is down roughly 6%.

Based on its current share price, UOB shares are offering dividend investors a trailing 12-month dividend yield of 5.5%.

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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