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Singapore's UOB to launch pan-ASEAN digital bank

Lender aims for up to 5m customers in five years

A woman passes the United Overseas Bank branch in Singapore
United Overseas Bank has the biggest share of Singapore’s housing market and is thus seen as most vulnerable to a slowdown in the sector.   © Reuters

SINGAPORE (Nikkei Markets) -- United Overseas Bank is launching a digital bank as it targets the mobile-savvy in its effort to add more customers across Southeast Asia and expand its presence.

Dennis Khoo, UOB's head of the regional digital bank and digital banking, said the initiative would be rolled out over the next few months. UOB is hoping to get 3-5 million customers over the next five years for the new entity that will eventually operate in half of the 10 countries in the Association of Southeast Asian Nations, namely Singapore, Malaysia, Thailand, Indonesia and Vietnam.

Although its latest earnings handily beat expectations, the lender, the smallest of the big three in Singapore, said the economic environment has become more uncertain.

Over the next few months, property transaction volumes could decline after the government responded to rising land prices with cooling measures in July, UOB Deputy Chairman and CEO Wee Ee Cheong said at a Friday media briefing following its results. "This will impact future pipeline, though our housing loans this year will not be affected due to ... loans booked previously," Wee said.

UOB has the biggest share of Singapore's housing market and is thus seen as most vulnerable to a slowdown in the sector. The family-controlled lender also has the widest Southeast Asian footprint among the city-state's banks, making it a popular proxy for investors who want to bet on the region.

According to Wee, Southeast Asia would continue to benefit from intraregional investment flows despite the slowing Chinese economy and trade tensions with the U.S.

The digital bank would "position us well for the future," he said.

United Overseas Bank deputy chairman and CEO Wee Ee Cheong United Overseas Bank Deputy Chairman and CEO Wee Ee Cheong. (Courtesy of United Overseas Bank) 

Although it acknowledged the growing risks at home and externally, UOB reiterated its guidance for loans and fee income to grow in the high single digits this year.

Its net profit for the three months ended June rose 28% year on year to a new high of 1.08 billion Singapore dollars ($789 million). The earnings were lifted by rising loan volumes and wider lending margins as well as higher fees and lower provisions for bad debt.

The results far exceeded the 15% growth forecast by analysts in a Bloomberg poll and eclipsed those of its bigger rival DBS Group Holdings, which reported a smaller-than-expected 20% rise in quarterly net profit to S$1.37 billion due to losses in its treasury market operations.

Oversea-Chinese Banking Corp, the third member of Singapore's big three banks, is due to report second-quarter earnings on Monday.

According to UOB, net interest income grew 14% on year to S$1.54 billion during the quarter, supported by loan growth of 10% and an 8-basis-point improvement in net interest margin to 1.83%.

Meanwhile, total allowances for bad debt halved to S$90 million as the bank last year accelerated recognition of vulnerable exposures in oil and gas and shipping sectors.

Net fee and commission income rose 11% to S$498 million on broad-based growth in loan-related, fund management, credit card and trade-related fees.

However, other noninterest income decreased by 3% to S$302 million mainly due to a lower net gain from investment securities.

The lender raised its interim dividend to 50 Singapore cents a share from 35 Singapore cents previously.

UOB said the bank would provide further details about its regional plans during the official launch of its Vietnam subsidiary on Monday.

--Kevin Lim

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