High costs hound UOB on back of aggressive digital banking push

While credit costs are also on the rise.

United Overseas Bank will grapple with rising business costs in the coming year, according to a report by DBS.

DBS said that operating expenses will remain elevated due to the bank's continued business expansion and its technology, which is required particularly for digital banking and cyber security.

Its other investments to further enhance regional operations are also ongoing but, DBS does not expect the increase to be as high.

UOB's cost-to-income ratio is expected to stay within the 43-45% range in the near term, but is targeted to drop to 40% over the longer term.

Apart from higher operating costs, UOB also needs to deal with high credit costs.

“Compared to peers, UOB’s credit costs tend to range at higher levels largely due to its conservative stance towards setting aside higher general provisions (1.4% of total loans). This causes overall credit charge to edge 10bps higher than peers’ average. We expect UOB’s credit costs to continue to hover around 32bps,” DBS said.