UOB’s Indonesia business growing strongly

We visited management of UOB Indonesia in Jakarta, and came out optimistic on its
growth prospects there. We believe UOB’s strategy to grow its overseas operations in Malaysia,
Thailand and Indonesia is in the right direction. UOB remains our top pick within the banking sector.

Indonesia operations to grow faster than Singapore. UOBI aims to contribute pre-tax profit
CAGR of 30% by 2015. This will be achieved via aggressive customer acquisition in the
targeted customer segment of consumer, commercial and corporate.

UOBI to leverage on UOB expertise and name. Whilst Indonesia loans currently account for a
small 3.6% of UOB global loans, management intends to grow the Indonesia operations more
aggressively. UOBI will leverage on the UOB name and expertise to build its business. UOBI will
avoid competing on interest rates, but attempt to offer better services to clients eg improving on
channel delivery and speed of approval, etc.

Focusing on savings deposits to fund asset expansion. Strong 2010 loan expansion has led
to the loan deposit ratio rising to 97% as of December 2010, versus December 2009’s 89%. With savings deposits accounting for 26% share of total deposits, UOBI plans to aggressively expand its
savings deposits to fund its future asset expansion. There has been some initial success, with
deposits rising 30% YoY as of March 2011.

Loan growth to offset effects of NIM squeeze. UOBI’s 4Q10 NIM of 6.05% is narrower than
3Q10’s 6.60%, and management pointed to further squeeze going forward, as competition
intensifies. However, loan expansion will help to build UOBI’s net interest income. UOBI loan
growth will also add to UOB’s global loan expansion.