UNITED OVERSEAS BANK LTD (SGX:U11)
United Overseas Bank 3Q21 - ASEAN Recovery In 2022, NIM Expansion In 2023
- UOB reported net profit of S$1,046m for 3Q21 (+57% y-o-y, +4% q-o-q), which is slightly above consensus estimate of S$1,004m. It weathered mild NIM compression of 1bp q-o-q to 1.55%. Asset quality was stable and credit costs were maintained at 20bp.
- For 2022, management guided mid to high single-digit loan growth, driven by cross-border transactions and pick-up in ASEAN countries with reopening, and further moderation in credit costs to 23bp.
UOB'S 3Q21 RESULTS
- UOB (SGX:U11) reported net profit of S$1,046m for 3Q21 (+56.6% y-o-y), above consensus estimate of S$1,004m.
- Achieving high single-digit loan growth. Loans grew 9% y-o-y and 3% q-o-q in 3Q21. The strong y-o-y growth was driven by Singapore, Greater China and rest of the world.
- Mild NIM compression. NIM eased marginally by 1bp q-o-q to 1.55%. Management attributed the compression in loan margin by 3bp q-o-q to 1.87% in 3Q21 to competition and the flight to serve large high-grade corporations. High-grade corporate customers provide multiple revenue streams and the return to risk weighted assets is attractive.
- Stable non-interest income. Fees grew 15% y-o-y but were flat q-o-q. Wealth management fees increased 24% y-o-y but receded 6% q-o-q. Loans/trade related fees moderated 6% q-o-q after hitting a record high in 2Q21. Credit card fees grew 13% y-o-y and 27% q-o-q. Trading & investment income increased 5% q-o-q due to higher investment gains and stable customer-related treasury income.
- Maintaining lean cost structure. Operating expenses increased 6% y-o-y and cost-to-income ratio was maintained at 43.7%. UOB prioritises strategic investments in people and technology to enhance digital/product capabilities and improve customer experience.
- Asset quality has stabilised. NPL ratio unchanged at 1.5%. Credit costs eased to 20bp (mainly specific provisions), similar to the level in 2Q21 but much lower than 68bp in 3Q20. Loan-loss coverage is healthy at 106%.
ESSENTIALS – HIGHLIGHTS FROM UOB'S RESULTS BRIEFING
- Guided positive outlook for 2022. Management guided mid to high Now Pay Later in partnership with e-commerce platforms in Indonesia.
- Well-deserved accolades. UOB was recognised as the World’s Best Bank for SMEs by Euromoney and Global Finance.
- See
Jonathan KOH CFA
UOB Kay Hian Research
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https://research.uobkayhian.com/
2021-11-05
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