United Overseas Bank (OTC:UOVEY) (UOB) has become the first global member to join both LCH SwapClear and ForexClear as a direct clearing member, marking a significant milestone for LCH in the Asia Pacific region. The Singapore-headquartered bank is the first in Southeast Asia to join ForexClear as a direct member, and the last of the local Singapore banking groups to join SwapClear.
UOB successfully cleared its first Interest Rate and FX Derivative trades as a direct member on Tuesday. This development expands LCH's presence in the Asia Pacific region, which now includes 15 direct members and over 170 clients. It also signifies strong growth across LCH SwapClear and ForexClear in APAC, with a 24% and 41% year-on-year increase in the number of trades cleared, respectively.
SwapClear offers access to deep liquidity in the over-the-counter interest rate swap market, covering 95% of the 'vanilla' interest rate swap market. On the other hand, ForexClear provides capital, margin, and operational efficiencies for both deliverable and non-deliverable FX.
LCH's growth in the region has been notable. Since 2021, the SwapClear platform has seen an 80% growth in APAC currencies or currency pairs notional cleared. In the same period, ForexClear has experienced a 14% growth in notional cleared.
Isabelle Girolami, CEO of LCH Ltd, expressed her delight at UOB joining their services. She emphasized that APAC is a key strategic market and growth driver for LCH. She added that they are committed to enabling members to benefit from economies of scale, along with margin, capital, and operational efficiencies.
Leslie Foo, Group Head of Global Markets at UOB, saw their partnership with LCH as a way to unlock further liquidity across multiple asset classes. He emphasized that regulations have placed greater financial resource requirements across their portfolios, and they will benefit from LCH’s risk management solutions and the capital and margin efficiencies it will enable across their rates and FX clearing activity.
Central clearing continues to be a key focus for financial institutions in Asia Pacific as they seek to benefit from robust risk management and capital efficiencies. In Q4 2023, London Stock Exchange Group (LON:LSEG) plans to go live with its new Non-Deliverable Forward (NDF) matching platform in Singapore, incorporating clearing into the FX trade execution process for the first time.
InvestingPro data shows UOB's strong financial position, with a market cap of 34.42B USD and a low P/E ratio of 8.62, reflecting its value proposition. The bank's revenue growth has been accelerating, with a 36.32% increase in the last twelve months to 9433.14M USD, according to InvestingPro metrics. This aligns with one of the InvestingPro Tips, which highlights UOB's accelerating revenue growth.
Despite facing challenges such as weak gross profit margins, UOB has maintained its dividend payments for 32 consecutive years, offering a dividend yield of 5.78%. This consistent dividend payment is a testament to the bank's resilience and commitment to its shareholders.
InvestingPro Tips also suggest that UOB's stock generally trades with low price volatility, making it a potentially stable investment. The bank is also expected to remain profitable this year, as it has been over the last twelve months, which is a positive sign for potential investors.
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