The UOB said on Saturday that the bank was “well positioned” to benefit from interest rate hikes in the United States, with around 70% of its portfolio at floating rates.

In March, the Fed raised interest rates by 25 basis points, with the benchmark federal funds rate currently targeting 0.25% to 0.5% from near zero. St. Louis Federal Reserve Chairman James Bullard told CNBC last week that he believes the benchmark short-term borrowing rate should rise to around 3.5% in response to higher inflation. .

The UOB projects that every 25 basis point hike in the US federal funds rate would result in an improvement of about 4 basis points in net interest margin (NIM), or about S$150 million in revenue. additional net interest per annum, based on the current balance sheet, the bank said in response to shareholder questions ahead of its annual general meeting (AGM).

Repricing of loans

“However, there will be some lag with the repricing of loans,” UOB said.

In February, UOB reported net profit of S$4.08 billion ($2.99 ​​billion) for 2021, up 40% from 2020.

Asked about the proposed acquisition of Citigroup’s consumer banking operations in Indonesia, Malaysia, Thailand and Vietnam, UOB reiterated that the deal would double its retail business in Southeast Asia to 5.3 million. customers, to reach the customer acquisition target five years ahead of schedule.

Citi Deal to increase unsecured loans

UOB noted, in response to a question from a shareholder, that the deal with Citi would increase unsecured loan revenue to 36% of revenue from the current 10%.

“Their operating model is capable of generating superior performance. Citi’s portfolio, which has been tested for the past two years during the pandemic, is high quality, resilient with superior returns,” UOB said.

Impact of digital banking

Asked about the potential impact of the introduction of digital banks in Singapore, UOB said it expects limited impact, with only around 5% of its revenue at risk.

“Singapore’s banking market is highly penetrated and incumbent banks enjoy consumer confidence,” the UOB said.

The bank added that it is investing in technology, including artificial intelligence (AI), data analytics and robotic process automation, with its digital banking app, TMRW, named the best digital bank in Asia. du Sud-Est by The Digital Banker for two years.

This article originally appeared on “Shenton Wire”.