UNITED OVERSEAS BANK LTD (SGX:U11)
United Overseas Bank (UOB) - Takeaways From Taiwan ASEAN Conference
- Management guided for mid-single-digit loan growth in 2019. NIM receded by 1bp q-o-q to 1.80% in 4Q18 but should recover due to hikes in mortgage rates in 1Q19.
- UOB will launch TMRW, its mobile-only digital bank, in Thailand. It targets 3m-5m digital customers in five markets over the next five years.
- UOB is committed to maintaining dividend payout ratio at 50% if CET1 CAR stays above 13% and it achieves RORWA of 1.60-1.65%.
WHAT’S NEW
- UNITED OVERSEAS BANK LTD (UOB, SGX:U11) will stay disciplined in pursuing sustainable growth as global uncertainties persist. It will maintain a risk-focused approach while equipping its staff for the future.
Management guided for mid-single-digit loan growth in 2019 (2018: +10.9%).
- Cooling measures on private residential properties were imposed in Jul 18. Thereafter, private residential properties sold directly by developers dropped 39% q-o-q to 1,836 units in 4Q18 as investment demand was curtailed. However, demand has since stabilised driven by first-time home buyers for owner occupation.
- Management expects mortgages to grow at low-to mid-single-digit in 2019 (2018: +4.3%). Loans to Building & Construction should moderate due to the slowdown in en-bloc transactions (2018: +17.7%).
NIM is expected to maintain at about 1.82bp, with some potential upside.
- UOB will benefit from hikes in mortgage rates in 1Q19. New mortgages are currently priced at 2.4% for 2- year fixed rate packages and 2.3% for floating rate packages (3-month SIBOR +40bp), compared to below 2% for 2018.
Fees should grow by mid-single-digits.
- Management expects CIR to be stable at 44% and guided for credit cost of 20-25bp. UOB targets to achieve ROE of 12% for 2019.
Launching digital bank in Thailand.
- UOB will launch TMRW, its mobile-only digital bank, in Thailand. TWRW (pronounced “tomorrow”) is developed in-house. UOB also leverages on fintech partnerships with Personetics and Meniga to learn in real time how to deepen customer engagement.
- TMRW targets to meet the needs of millennials in ASEAN. It provides simple and engaging user experiences and delivers seamless omni-channel experiences, and translates transaction data into actionable insights, enabling customers to be smarter at saving and spending.
- UOB targets 3m-5m customers for TMRW in five markets over the next five years.
UOB has renewed its strategic regional bancassurance partnership with Prudential for another 15 years.
- It will distribute Prudential (SGX:K6S)’s life insurance products to its consumer banking customer base in Singapore, Malaysia, Thailand, Indonesia and Vietnam. The partnership leverages on UOB’s omni-channel network to offer protection and wealth solutions, including a digital initiative to be launched in 2020. The upfront fee of S$1,150m would be accrued over the life of the partnership starting 1Q20.
- Prudential has sweetened the deal by adding performance incentives, which were not available in the initial 10-year deal.
UOB is committed to maintaining dividend payout ratio at 50%
- if CET-1 CAR stays at above 13% and it achieves RORWA of 1.60-1.65%.
Jonathan KOH CFA
UOB Kay Hian Research
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https://research.uobkayhian.com/
2019-03-15
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