United Overseas Bank UOB - Maybank Kim Eng 2015-11-02: Consistent performer

United Overseas Bank UOB - Maybank Kim Eng 2015-10-14: Fundamentals intact UNITED OVERSEAS BANK LTD UOB bank U11.SI 

United Overseas Bank - Consistent performer 

  • In-line. Commendable 3Q15 results, topped with an one-off dividend of SGD20cts/share to commemorate 80th anniversary. Total income and net profit +8.2%/+12.6% QoQ. 
  • Earlier provisions may soften impact from delinquencies ahead. Heightened risk and sluggish loan landscape typically present an unfavourable risk-return trade-off for the sector. 
  • We prefer UOB as it is best positioned to navigate the current cycle. Maintain HOLD w/TP of SGD 21.00, at 1.2x FY15 P/BV. 

Stable 3Q15 

  • 3Q15 NIMs were flat QoQ at 1.77% but up from 1.71% in 3Q14. As expected, loan growth was muted rising 3.7% YoY, but slightly higher at 5.5% YoY in constant currency terms. 
  • Non-interest income was boosted by gains from sale of AFS securities and stronger trading income. Provisions +5.3% QoQ and -1.2% YoY, was cushioned by earlier pre-emptive provisions, especially for the Indonesian operations. 
  • Overall 9M15 PATMI of SGD2,421m was in-line with our expectations. 
  • An one-off dividend of SGD20cts/sh was declared. 

Impressed with management 

  • Our 14 Oct report, The NIM Enigma, suggests that UOB is sensitive to both repricing interval and credit spreads. We see slight upside to NIMs. 
  • Management also intends to raise credit spreads in view of weak economic outlook and guided constant currency loan growth of 5%. 
  • Management is optimistic that current provisioning level is adequate for Indonesian NPLs for at least the next 2-3 quarters and looking to selectively add to the Indonesian book. 
  • Singapore credit approvals are up for two consecutive quarters. 
  • We have marginally revised our net profit estimates by 0.3%/- 0.2%/1.2% for FY15/16/17 after adjusting for total income, overhead costs and taxes. 
  • UOB is our preferred bank play. Maintain HOLD with SGD21.00 TP, at 1.2x FY15 P/BV, close to 0.5SD below its mean since 2005.

Ng Li Hiang Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-11-02
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 21.00 Same 21.00