UOB proposes special dividend, share buyback programme as it unveils long-awaited capital return plans

UOB’s board has announced a S$3 billion package to distribute surplus capital over the next three years, as it aims to bring down excess capital.

The lender is proposing a special dividend of S$0.50 per share – paying out S$800 million of UOB’s surplus capital – over two tranches in 2025.

It also introduced a S$2 billion share buyback programme, where over the next three years shares will be acquired from the open market and cancelled.

UOB on Wednesday (Feb 19) posted a net profit of S$1.52 billion for the fourth quarter ended Dec 31, 2024, up 8.6 per cent from S$1.4 billion a year earlier. 

“Our disciplined approach of pursuing long-term growth with stability has served us well, and we are confident of enhancing shareholders’ value in the years to come,” said UOB chief executive Wee Ee Cheong, at the lender’s fourth-quarter results briefing on Wednesday.

The package is a long-awaited move from UOB. During its third-quarter results briefing in November 2024, Wee said the bank was open to investing its excess capital in growth, or returning it to shareholders, whether through share buybacks or more dividends.

This came after analysts and investors were focused on the Singapore banks for their capital return plans, given that all three had excess capital arising from Basel IV reforms.

As at December 2024, UOB’s Common Equity Tier-1 (CET-1) ratio stood at 15.5 per cent. After taking into account the Basel IV reforms, its fully loaded CET-1 would have been 15.4 per cent.

UOB group chief financial officer Lee Wai Fai said: “On the back of this capital strength, we are confident to continue to deliver consistent and sustainable returns to our shareholders.”

He noted that the lender is committed to bringing its CET-1 ratio down to 14 per cent.

Post the distribution package, UOB will likely be left with excess capital of a few hundred million dollars, although “that number could grow as the base grows”.

Lee added: “If the earnings capacity is a lot stronger, technically the CET-1 ratio will be higher because you’re adding to the base.”

He also pointed out the need to keep capital for growth, especially as the lender remains confident of Asean’s prospects. “We are confident that we still have some work to do in the region, and we’re confident that we need the risk-weighted assets to push this vision of regional growth.”

DBS was the first mover among the local banks to return its excess capital. It announced a surprise S$3 billion share buyback programme alongside its third-quarter results in November 2024. This was on top of its normal dividends, and previously announced special dividends and bonus issues.

During its Q4 results announcement last week, DBS added that it will issue a capital return dividend of S$0.15 per share per quarter. This will be paid out over the financial year 2025, and it will pay out a similar amount in the next two years.

As for OCBC, its management earlier said it prefers to give dividends over share buybacks to return excess capital to shareholders.

It is also looking to keep its excess capital as dry powder to support franchise flows and potential inorganic growth opportunities that may pop up. OCBC is due to report its Q4 results on Feb 26.

Shares of UOB were down 0.4 per cent or S$0.17 at S$38.48, as at the midday break on Wednesday.