UOB expects to benefit from the US trade war with China

Singapore UOB bank branchSingapore UOB bank branch

Singapore’s United Overseas Bank (UOB) expects to benefit from rising U.S.-Sino trade tensions, with companies set to diversify their supply chains into Southeast Asian countries, the bank said Wednesday. 

On Monday, the trade war stepped up another notch, with Beijing announcing plans to impose tariffs on US$60 billion worth of imports from the U.S. in retaliation for U.S. President Trump increased tariffs on imports from China Friday.

“New business flows into Southeast Asia are very likely given the escalation in global trade tensions. More businesses are expected to diversify their supply chains into ASEAN,” Wee Ee Cheong, UOB deputy chairman and CEO, told analysts at the bank’s annual corporate day briefing.

ASEAN stands for the 10-member Association of Southeast Asian Nations; it promotes political and economic cooperation in the region and has lowered trade barriers within the bloc.

“UOB is well-positioned to help its customers capture this opportunity for growth,“ Wee said, noting his bank has been acquiring banks across the region. UOB is also the first Singapore bank to establish a subsidiary in Vietnam.

Many analysts have pointed to Vietnam as a likely destination for manufacturers seeking to move production out of China in the wake of the Trump administration’s tariffs.

“In 2018 alone, we helped more than 500 companies realise their expansion ambitions across the region,” Wee said, adding UOB was strengthening its network across Southeast Asia.

Currently, approximately 40 percent of UOB’s total operating profit comes from outside its home base of Singapore, and the bank expects this percentage to rise to 50 percent by 2021.

Virtual banking

UOB also pointed to its investments in new technology as it pursues expansion in the region. That included spending S$100 million to launch a virtual bank, called TMRW and pronounced “tomorrow,” in ASEAN-member Thailand and in a second country, which will be announced later this year.

UOB views Thailand both as a market for virtual banking and as a testing ground for its technology.

The bank didn’t disclose how many people have used the TMRW service since its launch three months ago, but it added the acquisition cost per client still needs to drop. 

The app’s interface, which leverages artificial intelligence and fintech acquisitions, appears easy-to-use and can provide users data relevant to their financial lives.  For example, it can itemise monthly expenses, show how much was spent on a holiday overseas, or alert users if their gym has increased its monthly fee.

TMRW’s chatbot is programmed to direct users to a live agent if it isn’t able to adequately respond to their questions or if key words, such as “fraud,” are used.  For the latter, a bank agent will actually telephone the client immediately.  The agent will have access to the chat history, so users do not have to repeat information.

UOB said it was also revamping its branches to include fewer teller counters and more space for “value-added” interactions with its customers.

It estimated 80 percent of consumers demand a personal interaction before taking out a mortgage or investing in wealth management, while only 20 percent are willing to buy these products online.

Tailoring branches

At the same time, rather than use cookie-cutter designs for its branches, the bank was tailoring them to their location.

For example, UOB’s newest branch on Singapore’s tony Orchard Road is decorated “upscale” to cater to affluent professionals, with a view to higher value transactions. Visitors present their national identity card (NRIC) to get a ticketing number and UOB can send them product information while they wait.

Meanwhile, in Tampines, part of Singapore’s “suburbs,” UOB designed the branch to cater to families with young children.

UOB said it was trying to keep most of its branches in areas with high traffic, except in locations, such as Thailand, where the government may mandate a presence.

The bank also wasn’t aiming to directly cut costs as a way to improve its bottom line.

“If you start with a cost-cutting exercise, you will end up with customers that are very unhappy,” Lee Wai Fai, UOB’s chief financial officer, said at the event. “We know that engagement is what matters today . . . If you can engage customers, you will improve processes and bring down costs.”

Earlier this month, UOB reported its first quarter net profit increased 8 percent on-year to S$1.05 billion as strong loan growth of 12 percent offset a drop in its net interest margin.

Correction: This article has been updated to reflect that UOB’s virtual bank is called TMRW. 

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