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(Bloomberg) – United Overseas Bank Ltd. has imposed a freeze on hiring, payments and promotions as the Singaporean lender prepares for a further decline in earnings in the wake of the coronavirus pandemic.
The city-state’s third-largest bank told staff it expects the situation to get worse before improving when the government cuts back some of its support, according to an internal memo sent to senior staff. The hiring freeze will last until December 2021, and any exceptions will need approval from senior officials. Salary increases and promotions will be suspended until further notice, according to the memo.
All employees “must play their part, controlling costs and headcount,” according to the memo sent on behalf of HR Director Dean Tong, Chief Strategy and Transformation Officer Federico Burgoni and Chief Financial Officer Lee Wai Fai. . “We will review them dynamically as the situation improves.”
Given the economic uncertainty, the UOB “must take a disciplined and selective approach to any new staff increases,” Tong said in response to inquiries. The bank will continue to “invest and recruit for roles essential to our strategic priorities,” he said.
To protect “the livelihoods of our people, we are keeping wages at their current levels for now and will review our stance as the external environment improves,” Tong said.
UOB, which operates in 19 markets including China and Hong Kong, Thailand and Malaysia, is among the global banks looking to cut costs as the economic fallout of the virus hits businesses. International lenders to HSBC Holdings Plc, Credit Suisse Group AG and Wells Fargo & Co. are cutting jobs, while Singapore’s three largest banks have pledged to avoid staff cuts stemming from the pandemic.
In August, UOB posted its second consecutive quarterly slump in earnings and another increase in loan loss provisions. The company employs some 26,000 people in its corporate and retail businesses, as well as in the wealth management, commercial and private banking units.
What Bloomberg Intelligence says:
“UOB 2020-2021 Hiring, Payment and Promotion Freeze Heralds Risks for Dividend Payments this Year as Lender Could See Earnings Contraction of More Than 30% Due to Economic Headwinds in Key Markets “. The bank’s increased exposure to small businesses in Singapore increases its vulnerability to its local peers.
–Diksha Gera, Asia Pacific Banking Analyst
Shares of UOB rose 0.3% on Tuesday. The stock is down 26% this year, the worst performance among Singapore’s three banks.
Like their global competitors, Singapore’s lenders are bracing for a wave of sour debt as the coronavirus crisis hits the economy. Authorities are using fiscal and monetary tools to provide support against a record recession that came with the pandemic. While the government’s relief measures have supported businesses, the central bank has indicated that a debt moratorium will not be extended.
In response to the crisis, Oversea-Chinese Banking Corp. is reviewing manager compensation as a way to cut costs, Chief Executive Samuel Tsien said in August. DBS Group Holdings Ltd., Singapore’s largest bank, said it is analyzing its cost structure and has been cutting expenses.
© 2020 Bloomberg LP
