United Overseas Bank - CGS-CIMB Research 2021-02-25: NIM Stronger Than Peers’

UNITED OVERSEAS BANK LTD (SGX:U11)

United Overseas Bank - NIM Stronger Than Peers’

UOB's 4Q20 net profit of S$688m (+3% q-o-q) was in line with our expectation but 6% below consensus. NIM rose 4bp q-o-q to 1.57%, above peers’ (-4bp to +2bp).
Asset quality under control. Credit cost of 55bp in 4Q20 (FY20: 57bp) was in line with expectations. Moratorium loans: 6% in Jan 21 vs 10% in Oct 20.
Reiterate ADD. UOB declared final dividend of S$0.39 per share declared (with scrip), FY20 total dividend at S$0.78 per share.

UOB (SGX:U11)’s 4Q20 net profit of S$688m (+3% q-o-q, -32% y-o-y) was in line with our expectations and 6% above consensus. FY20 formed 100%/101% of our/consensus forecasts.
UOB declared final dividend of S$0.39 per share for 4Q20, bringing UOB's FY20 total dividend per share to S$0.78 (as bound by MAS’s dividend cap at 60% of FY19’s payout). This represents a ~45% dividend payout ratio. A scrip dividend scheme will be applied to 4Q20 dividends.

NIM rose 4bp q-o-q to 1.57% in 4Q20 (3Q20: 1.48%), above the street’s expected ~2- 3bp expansion. Consequently, NII rose 3% q-o-q. The NIM improvement primarily came on the back of lower funding costs and a larger 53.5% CASA proportion (3Q20: 51%, 4Q19: 45.4%). UOB's full-year NIM came in at 1.57% (-21bp y-o-y from FY19’s 1.78%).
Relative to peers that still saw declines in total income, UOB posted flattish q-o-q total income of S$2.2bn (-8% y-o-y). The rise in NII (+3% q-o-q) and fee income was offset by weaker treasury income.
Fee income showed an uptrend (+2% q-o-q, +10% y-o-y), thanks to better credit card income (+15% q-o-q, -20% y-o-y), which was offset by weaker loan-related fees (-13% q-o-q, +19% y-o-y). Wealth management fees held steady at S$188m (flattish q-o-q, +16% y-o-y).
Treasury income declined (-28% q-o-q, -32% y-o-y) due to lower trading and bond sales amid relatively low rates.

High single-digit loan growth in FY21F (FY20: +4.8%), double-digit growth in wealth fees (FY20: +11% y-o-y), stable CTI (FY20: 45.6%), lower credit costs (FY20: 56bp).
We project neutral to positive movement of UOB Share Price on the back of this set of results. Summary of key statistics available in report attached below.

We reiterate our ADD call for UOB and GGM-based target price of S$27.72.
A downside risk is significant NPL accretion following the expiry of loan moratoriums.
See UOB Share Price; UOB Target Price; UOB Analyst Reports; UOB Dividend History; UOB Announcements; UOB Latest News.

Andrea CHOONG CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2021-02-25

SGX Stock Analyst Report ADD MAINTAIN ADD 27.720 SAME 27.720