United Overseas Bank - Maybank Kim Eng 2020-09-18: Work In Progress

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

United Overseas Bank - Work In Progress


Some catching up to do on Green banking strategy

  • As a bank with a wide ASEAN footprint, UOB (SGX:U11) is exposed to multiple ESG risks including contagion from customers. Additionally, as a group with a large SME customer base, UOB is particularly exposed to social risks in terms of balancing shareholder returns and supporting small business owners in a backdrop of COVID-19.
  • UOB's ESG financing portfolio and certain diversity metrics lag Singapore banking peers. Nevertheless, we believe UOB's ESG risks are typical for a D-SIB with a regional presence. Near term asset quality risks and weak operating conditions lowers earnings visibility.
  • Maintain HOLD on UOB.
  • We prefer DBS (SGX:D05) for North Asia growth, client mix.



Increasing financial inclusivity

  • UOB has a recognised franchise for SME banking that is core to its strategy. The group also has been proactive in supporting this customer base by introducing early COVID-19 relief measures ahead of its peers in 1Q20.
  • UOB has launched a digital banking product in Thailand and Indonesia (with plans for wider regional reach) to increase financial inclusivity – especially amongst younger demographics. It also has a track-record of investing in productivity tools and offering flexible working arrangements to key employee segments such as mothers, students, caregivers even before the pandemic.


Governance and diversity risks need to be watched

  • UOB has had several mis-selling incidents in the past 2-years, which raises Fair Dealing and Governance Risks. UOB may also be exposed to data security and cyber-attack risks given the sizable scale of its technology platforms. The group has not had material technology related incidents in the past few years.
  • From a diversity aspect, women make up just 10% of Board membership (the lowest amongst its Singapore peers) and 35% of senior management at end-2019.

Near term earnings visibility unclear






Thilan Wickramasinghe Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-09-18
SGX Stock Analyst Report HOLD MAINTAIN HOLD 20.790 SAME 20.790



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