United Overseas Bank - OCBC Investment 2019-07-01: Focusing On Core Franchise

UNITED OVERSEAS BANK LTD (SGX:U11) | SGinvestors.io UNITED OVERSEAS BANK LTD (SGX:U11)

United Overseas Bank - Focusing On Core Franchise

  • Asset quality trends remain benign.
  • Targets ROE close to 12% this year.
  • Continues to build on its digital strategy.



Management meeting highlights

  • UNITED OVERSEAS BANK LTD (UOB, SGX:U11) re-affirmed credit cost guidance of ~20-25 bps this year, asset quality trends remain benign. 2Q margins should hold up, driven by mortgage re-pricing and as the bank unwinds some of the higher cost deposits collected in previous quarter.
  • UOB also noted that some competition seen in the Singapore mortgage market and noted competition has reduced pricing to keep market share. UOB may try to reduce its fixed deposit rates to lower funding costs, its mortgage book is largely pegged to internal benchmark rate or SIBOR, with minimal exposure to fixed deposit pegged mortgages.


Targets ROE ~12% this year

  • Loan growth outlook is maintained at mid-single digit this year. Medium term outlook hinges on interest rates and US-China trade developments, which the bank continues to assess and have not booked provisions that relate to regional trade concerns.


Continues to build on its digital strategy, limited near term impact expected from new digital licenses MAS will issue

  • UOB has recently launched TMRW digital bank (Thailand) to tap younger customers (Generation Y/Z) which was received and aims to deepen customer engagement. The bank has also transformed the end-to-end customer journey, enabling instant digital onboarding for new-to-bank customers across its suite of products.



Fair value raised to SGD29.40 implying 1.3x price/book and 11.3x forward PER

  • Estimated dividend yield of ~5% provides attractive support. See UOB's dividend history.
  • Reports next quarterly results on 2 August.





OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2019-07-01
SGX Stock Analyst Report BUY MAINTAIN BUY 29.40 UP 28.900



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