UOB banks on 4 ASEAN income to hit 2026 ROE target

The bank aims to grow its wholesale banking and retail banking businesses.

United Overseas Bank (UOB) is banking on the increasing total income of its 4 ASEAN businesses and continuous loan expansion to reach its target return on equity (ROE) of 14% by 2026.

The Singaporean bank expects growth in its business volume and fee income, which should more than offset the negative impact of a net interest margin (NIM) compression.

UOB is especially banking on increased contribution from its businesses in Malaysia, Thailand, Vietnam, and Indonesia to 30% of its total income, whilst maintaining at least 50% of its total income in Singapore, noted UOB Kay Hian analyst Jonathan Koh.

One unlikely advantage coming UOB’s way is the effects of the trade conflict between US and China. The trade conflict is enabling ASEAN to regain its stature as a manufacturing hub, Koh said.

UOB’s extensive network of over 500 branches in the ASEAN region put it in position to take advantage of this opportunity.

Recent rate cuts by the US Federal Reserve have also strengthened regional currencies against the SGD in Q3 2024. 

“The stronger regional currencies augur well for increased contributions from ASEAN to UOB’s bottom line going forward,” Koh said.

UOB are also expecting to expand its wholesale banking and retail banking franchises.

The ASEAN 4 countries are expected to account for 20% of wholesale banking loans, and 25% of wholesale banking income, over the next three years.

Trade loans are expected to double and contribute 20% of total loans by 2026, with UOB touting its Infinity Cash platform and Infinity Financial Supply Chain Management platform.

On the retail banking side, UOB aims to expand its retail customer base to 10 million by 2026, from 8 million customers as of December 2023. It’s also targeting an increase in current account savings account (CASA) ratio for retail customers to 55% by 2026, up from 47% previously.