Bank reports net profit of RM1.02 billion, 16.8 per cent lower than the previous year, as it made pre-emptive provisioning on assets given the economic impact of COVID-19
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UOB Malaysia recorded a 3.7 per cent year-on-year increase in total operating income to RM3.21 billion in 2020. Net profit was 16.8 per cent lower at RM1.02 billion as the Bank was proactive in making pre-emptive provisioning on its assets given the uncertainties arising from the economic impact of the COVID-19 pandemic.
UOB Malaysia’s higher operating income was attributed to the 5.7 per cent growth in net interest income to RM2.20 billion, driven by proactive balance sheet management. However, the increase in net interest income was partially offset by the effects of the reductions in the Overnight Policy Rate to a historical low of 1.75 per cent between 22 January and 7 July 2020. While trading and investment income for the year grew, lower fee income and net foreign exchange gains led to a 3.5 per cent drop in non-interest income to RM938.8 million.
The Bank’s profitability was also impacted as its operating income growth was partially offset by an increase in allowances from the pre-emptive provisioning made for expected credit losses for both impaired and non-impaired assets. The allowances were RM356.1 million more than the previous year, largely for expected losses categorised as Stage 1 (within the next 12 months) and Stage 2 (indefinitely) on its loans, advances and financing portfolio. Nonetheless, the Bank maintained its sound asset quality with the net non-performing loan ratio sustained at 1.4 per cent.
The Bank remained prudent in managing its discretionary expenses. Total operating expenses increased by 1.1 per cent to RM1.28 billion as the Bank continued to invest in its technology infrastructure to support business growth.
Capital, funding and liquidity positions in 2020
Gross loans, advances and financing rose 1.5 per cent to RM87.5 billion and non-bank deposits increased by 5.0 per cent to RM93.6 billion. The Bank continued to maintain its strong capital base with its Common Equity Tier 1 and Total Capital ratios at 17.6 per cent and 20.5 per cent respectively. The Bank’s liquidity and funding positions also remained robust with its liquidity coverage ratio and net stable funding ratio well above the minimum regulatory requirements.
Mr Wong Kim Choong, Chief Executive Officer, UOB Malaysia, said, “UOB Malaysia’s 2020 financial performance saw the effects of the severe economic impact brought about by the travel restrictions and physical distancing requirements to curb the spread of the pandemic. Nevertheless, we maintained our strong balance sheet and effective resource management, with our sound asset quality underscoring our robust corporate governance, risk management and business practices.
“We also remained steadfast in support of affected customers in overcoming financial challenges. In addition to COVID-19 relief measures, including loan moratoria for business and individual customers, the Bank actively assisted customers in managing their financial well-being. Beyond the moratorium period that ended 30 September 2020, we extended targeted repayment relief assistance until 30 June 2021 to help customers emerge stronger from the crisis.”
UOB Malaysia remains focused on its strategic priorities
Even as resources were directed to efforts to help customers navigate through the crisis, UOB Malaysia remains focused on its strategic priorities of capitalising on regional growth drivers and strengthening its technology infrastructure to drive innovation and performance. The Bank is also continuing to invest in its people’s professional development and to enhance its capabilities to make banking simpler, smarter and safer.
“We will continue to place our customers at the heart of everything that we do. We will leverage our expertise and regional network to offer relevant and distinctive solutions through conventional and Islamic banking. We will remain prudent and disciplined as we forge a sustainable future with our stakeholders”, Mr Wong said.
UOB Malaysia’s Annual Report 2020 is available at www.uob.com.my.
Source: UOB Malaysia
