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Annual Report 2017

Global Markets

Global Markets offers financial products and solutions to help our clients meet their investment, liability and risk management needs. We develop and customise comprehensive treasury products and services across multiple asset classes. We also manage UOB’s funding and liquidity in accordance with regulatory requirements and optimise the Bank’s assets within our risk framework. Our prudent approach towards managing liquidity helps to maintain UOB’s funding stability and balance sheet strength.

We helped our Greater China corporate clients understand the region’s complexities and challenges and identify potential investment opportunities at a seminar we organised in September 2017.

2017 Highlights

Provided our clients with market access solutions to facilitate their investments into markets where they do not have direct access such as China and India;
Offered cross-border and cross-currency solutions to help our clients optimise their funding and investments amid changing market conditions;
Facilitated onshore Ringgit foreign exchange (FX) hedging activities for our corporate and financial institutional clients outside Malaysia via our global network as an Appointed Overseas Office (AOO) under Bank Negara Malaysia’s AOO Framework; and
Kept our clients abreast of economic developments, business challenges and potential opportunities in the region through organising seminars on topical issues.

2017 Performance

In 2017, our Sales and Structuring teams remained focused on helping our clients seize the right market opportunities. As a result, we saw a strong take-up rate for our investment and hedging solutions in FX, interest rates, credit and commodities. This in turn contributed to an increase in our overall transaction volumes of 18 per cent and revenue growth in our Business Banking and Financial Institutions Group client segments of 11 and 12 per cent respectively. Our total operating income, however, fell 12 per cent due to lower contribution from trading income.

The income derived from the products and services we offer to the Bank’s Group Retail customers and Group Wholesale Banking clients is reflected in the performance results of the respective customer segments.

Our 2017 revenue was well-diversified across geographies. Our North Asian markets registered solid double-digit growth, while income growth in our Southeast Asian markets was modest due to the muted market environment and spread compression during the year. Nevertheless, there was strong demand for onshore hedging of the Ringgit under Bank Negara Malaysia’s AOO framework.

During the year, we enhanced our market connectivity and capabilities to facilitate our clients’ cross-border investments. For example, UOB is a Foreign Portfolio Investor in India and a Qualified Foreign Institutional Investor in China, enabling us to help our clients invest in Indian and Chinese securities respectively. We also offer our clients access to the Chinese bond market via the China Interbank Bond Market and Bond Connect schemes.

We deepened our client engagement efforts through the sharing of economic, market and industry insights at a series of seminars. These included the UOB ASEAN-China seminar held in September 2017, during which our Greater China corporate clients heard from UOB’s experts and gained insights into the region’s challenges and opportunities.

Outlook

The US Federal Reserve is expected to increase its benchmark interest rate in 2018 as part of its monetary policy normalisation process and to continue with its balance sheet reduction programme. These developments are likely to exert upward pressure on US interest rates in 2018. In the event of a convergence in monetary policies globally, Asian central banks will likely normalise their monetary policies, which could lead to an increase in their domestic interest rates.

We expect the financial markets to remain volatile in an environment dominated by monetary policy normalisation or balance sheet reduction by most central banks. While the US economy is set to benefit from the passage of the US tax reform bill, the macroeconomic outlook could be affected by surprises from inflation, trade policies and geopolitical events.

Against the backdrop of expected volatility in interest rates, FX and commodities prices, we anticipate increased demand for tailored hedging solutions across multiple asset classes, and investment solutions to tap market opportunities.

Global Markets Sales and Structuring

Helping Our Clients Manage Their Investments, Liabilities and Risks

2017 was yet another volatile year for interest rates and FX. Amid the volatility, UOB supported our clients’ business needs actively, providing them with timely market intelligence and customised solutions.

During the year we offered our corporate clients structured solutions to cap their floating interest rates risk. We also executed our first metals reverse repo transaction, a secured funding transaction linked to physical commodities. This product enables our clients to improve their liquidity position by monetising their metals inventory at a lower cost of funds.

In light of the growing demand from a broader range of clients across Asia, we widened our fixed income and credit derivative footprint into Hong Kong and started offering Asian corporate bonds denominated in US dollar and Australian dollar. We also enhanced our fixed income capabilities by offering secured financing against corporate bonds, including funding solutions with longer-dated maturities and tri-party solutions, to meet our client’s liquidity requirements.

UOB continues to be one of the leading institutions offering structured deposits for the retail market. In 2017, we were the first Singapore bank to launch successfully a fund-linked structured deposit product to our retail customers, enabling them to enjoy principal protection and fund-linked returns.

Group Commodities, Brokerage and Clearing

Refining our Offering to Serve Our Clients’ Needs Better

In 2017, we restructured our commodities and bullion businesses and Group Bullion, Brokerage and Clearing was renamed Group Commodities, Brokerage and Clearing (GCBC).

With alignment to our clients’ business needs as the key focus of this restructuring initiative, we expanded our trading and structured solutions in other commodities and added precious metals trading to our suite of products and services. Our enhanced offerings in commodities hedging and investments provided our regional clients with more comprehensive solutions beyond FX and interest rate hedging. We also developed our gold loan business to meet the strong demand from our institutional clients in Greater China.

Our foreign exchange margin business remained a key growth driver for GCBC. Singapore and Hong Kong, as top FX and wealth management centres in Asia, continued to be the key markets from which we serve our clients’ needs.

We are also committed to providing our clients with trading and clearing access to major exchanges around the world. In recognition of our longstanding support of our clients, in 2017 we were named by the Singapore Exchange (SGX) as among the Top SGX-Derivatives Trading Members 2017 and Top Commodities General Clearing Members.

Other Key Sections

Corporate Governance
Five-Year Group Performance Summary
Our Awards and Accolades in 2017
Investor Reference

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