UOB's 83-year old chairman Wee Cho Yaw to step down next year

The group assures sensible management transition with a former CEO of Singapore Exhange assuming position.

Dr Wee Cho Yaw, the 83-year-old billionaire and former CEO of UOB, will step down as chairman (effective April 2013).

Chairman Wee will continue to serve as director and chairman emeritus. His son, Wee Ee Cheong is currently the CEO.

Hsieh Fu Hua, former CEO of Singapore Exchange Limited, will succeed Dr Wee as the new chairman.

Meanwhile, amid a very volatile environment for the financial sector, here's why UOB remains a top pick of Barclays Research:

UOB generated strong fee income growth to offset margin pressure from loan pricing competition. Momentum of ASEAN business was solid and contributed to 27% of group PTP. UOB's strong funding base (fully deposit funded across all of its key geographies) should continue support regional loan market share gains.

Fee income offset margin weakness: UOB reported 2Q12 net profit of S$713m, +3.6% q/q, 12% y/y, 11/14% above our/Bloomberg consensus estimates, respectively. Fee income grew 6.7% q/q, driven by lending and trade-related fees, and largely offset impact from margin contraction. Gain on investments held up better-than-expected, down by 24% q/q off a high base in 1Q. Cost income ratio was stable while asset quality remains benign.

Margin pressure in 2Q from loan pricing and growth in Hong Kong: Net interest margin fell 6bp q/q to 1.92% largely due to: 1) a 11bp q/q decline in average loan yield on pricing competition; 2) shift in loan mix into Hong Kong where margins are lower relative to other geographies (Greater China loans +4.8% q/q); and 3) a focus on high quality customers (risk weighted assets flat, vs loan growth of 1.4% q/q). Going forward, management guides for stable margins, continued focus on generating fee income and high single-digit loan growth.

ASEAN business momentum still strong: Malaysia, Thailand and Indonesia accounted for 27% of group PTP in 2Q (vs 22% in 1Q), benefiting from its diverse ASEAN footprint. Management sees stabilizing margins in Malaysia and Indonesia.

Sensible management transition: Dr Wee Cho Yaw, the 83-year-old billionaire and former CEO of UOB, will step down as chairman (effective April 2013). Chairman Wee will continue to serve as director and chairman emeritus. His son, Wee Ee Cheong is currently the CEO. Hsieh Fu Hua, former CEO of Singapore Exchange Limited, will succeed Dr Wee as the new chairman.

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