UOB profit rises by 6% and announces special dividend: Our Quick Take

UOB 4Q24 earnings highlights

UOB Group announced its earnings for the fourth quarter of 2024. Key highlights include: 

• Net profit reached record S$6.0 billion in FY24, up 6% year-on-year

• Total FY24 dividend of S$1.80 per share (50% payout ratio), plus special dividend of 50 cents per share in FY25 to mark 90th anniversary

• Announced S$3 billion capital return package including S$0.8 billion special dividend (50 cents/share) and S$2 billion share buyback program

UOB Group has reported a record net profit of S$6.0 billion for the financial year 2024.  This represents a 6% increase compared to the previous year. 

This growth was largely driven by increased income from fees and solid performance in trading and investment activities.

Net Interest Income rose slightly to S$2.45 billion in 4Q24, with steady loan growth balancing out the impact of lower net interest margin. 

UOB's net interest margin fell to 2.00% in 4Q24 from 2.05% in 3Q24 and 2.02% in 4Q23, likely reflecting the moderation in interest rates over the past year. 

Fee Income reached S$784 million in 4Q24, representing a growth of 6.8% compared to 4Q23. This was fueled by robust growth in wealth management fees and stronger credit card transactions.

Compared to the previous quarter, 4Q24 fee income declined by 3% due to seasonally softer quarter for loan-related and wealth activities. 

Other Income rose due to strong customer-related income from retail bond sales and effective trading strategies.

UOB plans to reward its shareholders with a total dividend of S$1.80 per share for FY24, an increase from S$1.70 per share for FY23. 

This includes a final dividend of 92 cents per share, in addition to an interim dividend of 88 cents per share previously announced. 

Find out how much dividends you will potentially receive as a shareholder of UOB with the calculator below. Note that this excludes the special dividend announced.

To celebrate its 90th anniversary, the bank is also proposing a special dividend of 50 cents per share in 2025, distributing a total of S$0.8 billion. 

The special dividend will be paid out over two tranches in 2025, with the first tranche of 25 cents per share to be paid in May 2025, and second tranches of 25 cents per share to be paid in August 2025. 

Furthermore, UOB will initiate a S$2 billion share buyback program, aimed at returning a total of S$3 billion in surplus capital over the next three years.

UOB maintained its guidance for 2025 total income to be higher than in 2024, driven by a high single digit loan growth and double-digit fee income growth. 

At the same time, costs are likely to be contained with the cost-to-income ratio at around 42%, while credit costs are expected to be benign in the 25-30 basis points (0.25-0.3%) range. 

What would Beansprout do?

UOB's share price initially reached a record high of S$39.20 following the market open on 19 February, before drifting downwards to be slightly lower as of noon.

This likely reflects the mixed earnings that were announced.

On a more positive note, the record profit for 2024 and special dividend announced are likely to be welcomed by investors. 

However, the moderation in net interest margin in 4Q24 may be an area of concern.

At the same time, investors may be hoping that there would be more capital management activities, after the company previously noted that the bank’s strong capital position allows it to consider capital management initiatives like dividend increases or potential share buybacks.

Annualising the final dividend of 92 cents per share and adding in the special dividend of 50 cents per share, the potential dividend yield for UOB in 2025 would be 6.1%.

This would be slightly below the potential dividend yield for DBS of 6.6%, which previously announced a capital return dividend. 

However, it would be above the forecast dividend yield of OCBC of 5.0%. 

UOB currently trades at a price-to-book valuation of 1.45x, above its historical average of 1.0x. 

Related links:

• UOB share price and share price target

• UOB dividend forecast and dividend history

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