United Overseas Bank - Maybank Kim Eng 2016-09-19: UOB Engage 2016 Key Takeaways

UNITED OVERSEAS BANK LTD U11.SI

United Overseas Bank (UOB SP) - UOB Engage 2016: Key Takeaways

We attended UOB Engage 2016 where it showcased its digital banking capabilities and various initiatives it intends to roll out.
We saw UOB’s digitalization efforts to differentiate itself through its ability to roll out technologies efficiently by standardising regional core operations and adopting a customer-centric approach to consumers and businesses.

UOB highlighted its consistent focus to build trust and relationships with customers in a digital banking world. By developing its own tokenization technology for contactless ATMs and instant issuance of digital cards, UOB has a first-mover advantage with a lead time of 6-12 months ahead of peers in the mobile contactless payment space.
To anchor its SME franchise, it launched Singapore’s first cloud-based integrated solution – BizSmart - to help SMEs streamline work processes and save costs.
It is also embracing a culture of innovation by adopting new ideas and technologies.

We are positive on UOB’s digitalization efforts and expect other banks to play catch-up. We think its digital capabilities are not inferior to peers.
While digitalization has resulted/will result in higher cost-income ratios for UOB, we see these costs as necessary to retain customers and possibly, lure new customers for faster and customized solutions as banks compete in the digital banking space.
We think UOB’s disciplined strategy will ensure that IT costs will not increase to exceptionally high levels. IT expenses formed < 10% of total expenses in the past 10 years and we estimate ~8-10% of total expenses related to IT from FY16-18E.

Singapore banks will continue to invest in IT capabilities and cost rationalization is priority.
Maintain HOLD at TP SGD18.34.

Ng Li Hiang Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-09-19

Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 18.340 Same 18.340