It’s been hard to avoid in the news, even if you’re not a Taylor Swift fan. The American pop sensation is due to play six concerts in Singapore in March 2024.
The hype has been on another level and it’s also had an unlikely beneficiary; local bank United Overseas Bank Ltd (SGX: U11), better known as just UOB.
That’s because the bank has nabbed exclusive rights to sell a certain amount of Taylor Swift tickets to its cardholders – in Singapore, Thailand, Malaysia, Indonesia, and Vietnam – a full 48 hours before tickets get released to the general public.
Indeed, the pre-sales window for UOB cardholders opened at noon today and within 10 minutes – according to The Business Times – more than a million virtual queue numbers were being issued.
As my colleague, Billy, wrote about last week, the concerts taking place in Singapore next year are set to attract a regional crowd that should boost tourism and related stocks.
But what about UOB? The craze around the bank and its cards has made headlines but will it benefit the bank’s shares? Let’s explore what it means for investors.
Credit cards contribute to UOB’s bottom line
If we think about the big three banks in Singapore, it’s true that credit cards can contribute a meaningful amount to their profits. UOB is no exception.
The cards businesses for the banks have been a bright spot as consumer spending rebounds in the post-Covid period.
For example, in 2022, UOB saw its credit card segment generate S$231 million in net fee income – contributing nearly 11% of its overall net fee income of S$2.14 billion during the year.
But, as readers can also see from the below, UOB’s credit card net fee income of S$81 million in Q1 2023 was a much stronger showing than the previous four quarters.
As a share of overall net fee income, credit cards also took a bigger share in Q1 2023 as that S$81 million figure made up nearly 15% of overall net fee income for UOB during the period.
Source: UOB Q1 2023 earnings presentation
Could see bump in credit cards in Q3 2023 numbers
It was reported by Bloomberg that, according to UOB, daily average credit card applications across Singapore, Thailand, Malaysia, Indonesia, and Vietnam jumped by 45% in the week that Taylor Swift announced her concert dates.
One positive stat on the new applicants is that customers aged 30-40 years old made up over one-third of the total.
Generally, individuals in that age bracket are likely to be more affluent, advanced in their careers, and have the disposable income to spend on credit cards versus those in their 20s.
However, given how late in the second quarter all this came to light, there won’t be any meaningful way for investors to see if there’s a significant increase in UOB cardholders (and accompanying spend) until the bank’s Q3 2023 earnings are out.
Looking beyond the short-term bump
However, beyond that UOB’s overall business is looking strong in the Southeast Asia region. Remember that the bank is nearly complete with its acquisition of Citi’s retail banking businesses in Thailand, Malaysia, Vietnam, and Indonesia.
The Thai and Malay deals were closed in November 2022 while the deal for the Vietnam business was completed in March of this year.
UOB says it expects the four acquisitions to double UOB’s existing retail customer base in the four markets. That’s a big deal.
For long-term investors, it’s probably worth looking beyond the Taylor Swift craze and focusing on UOB’s regional strength. Currently the bank’s shares are offering investors an attractive dividend yield of 4.9%.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.
