SINGAPORE – UOB on Feb 19 said it is returning $3 billion of surplus capital to shareholders over the next three years as the bank delivered a record profit of $6 billion for 2024.
The package includes special dividends and share buybacks to be delivered over the next three years.
DBS on Feb 10 unveiled a new capital return dividend on top of a $3 billion share buyback plan unveiled in November, sending its shares soaring and sparking a wider bank rally.
UOB is proposing a special dividend of 50 cents per share to be paid over two tranches in 2025, returning $0.8 billion of excess capital. This is also to mark UOB’s 90th anniversary in 2025.
A new share buyback programme of $2 billion has also been set up, where shares to be acquired from the open market will be cancelled. The programme is in addition to the share buybacks designed for the bank’s long-term incentive plans for employees.
The bank has declared a higher final dividend of 92 cents per share for the second half of its 2024 financial year, up from 85 cents the previous year. This brings the full-year dividend to $1.80 per share, representing a payout ratio of about 50 per cent.
Deputy chairman and chief executive Wee Ee Cheong told a results briefing on Feb 19: “Our disciplined approach of pursuing long-term growth, visibility has served us well, and we are confident of enhancing shareholders’ value in the years to come.”
UOB shares briefly hit an all-time high of $39.20 in the first hour of trading on Feb 19. The stock had gained 1.8 per cent last week.
They closed 0.2 per cent lower at $38.58, while DBS rose 0.5 per cent to $46.04 and OCBC also gained 0.5 per cent to $17.85.
Mr Yeap Jun Rong, market strategist at IG, noted that UOB’s financial results highlighted the earnings resilience of local banks and the attractive income proposition they bring in terms of increased dividends.
“However, with the share price rising ahead of the release, some optimism may have already been priced in, potentially leading to some ‘sell-the-news’ reaction. We saw a similar trend with DBS’ results on Feb 10, where the stock initially jumped before giving up its gains later in the day,” he said.
For the fourth quarter of financial year 2024, UOB’s net profit rose 9 per cent year on year to $1.52 billion. The earnings beat the $1.48 billion forecast by analysts in a Bloomberg poll.
They included $17 million in one-off expenses from the bank’s Citigroup integration costs after taxes, which was 81.9 per cent lower than the $94 million in the year-ago period.
Net interest income was up 2 per cent to $2.45 billion, supported by loan growth of 5 per cent. Net fee income and other non-interest income were relatively unchanged at $567 million and $443 million respectively.
Chief financial officer Lee Wai Fai said at the briefing that the bank’s net interest margin (NIM) moderated down to 2 per cent from the effect of interest rate cuts in the fourth quarter.
Wealth- and loan-related fees were seasonally softer, and trading and investment normalised to $367 million after an exceptional third quarter, he added.
For financial year 2024, the group’s net profit grew 6 per cent from a year ago to a record $6.04 billion, driven by strong net fee income and trading and investment income.
Net interest income stayed at $9.7 billion as loan growth of 5 per cent was moderated by the effects of interest rate movements on its NIM, UOB said.
Net fee income grew 7 per cent to $2.4 billion, led by a double-digit growth in wealth-related fees, stronger credit-card fees and higher loan-related fees.
High-net-worth assets under management rose 8 per cent year on year to $190 billion, said UOB.
On the outlook for interest rates, Mr Lee told the briefing that UOB expects the US Federal Reserve will not be aggressive in cutting rates in 2025 as US inflation shows signs of reigniting. Higher-for-longer rates have benefited banks in improving profitability by increasing net interest margins.
Mr Wee said: “Our long-term investments in regional platforms and capabilities are paying off, and we expect continued revenue growth this year.”
In 2024, the bank completed its integration of Citigroup’s consumer business in Thailand, following the same in Malaysia and Indonesia in 2023. UOB said the integration for Vietnam is on track to be completed by 2025.
While US tariff policies will likely hit the region, Mr Wee said: “We are closely monitoring developments, and so far Asean continues to be resilient.”
Asean’s strength, in turn, should drive growth for UOB, which focuses its strategy heavily on the region.
UOB’s results follow those of DBS, which posted a 10 per cent rise in fourth-quarter earnings to $2.62 billion. OCBC is set to report its results on Feb 26.
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