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United Overseas Bank - Maybank Kim Eng 2022-01-14: Citi ASEAN Is An Accretive Deal. Watch For Execution

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

United Overseas Bank - Citi ASEAN Is An Accretive Deal. Watch For Execution

  • UOB (SGX:U11)’s acquisition of Citigroup’s SE Asia assets is well timed to take advantage of ASEAN re-opening. The acquired client base is synergistic to UOB’s mass-wealth, omni-channel strategy and should further strengthen its integrated ASEAN franchise.
  • Execution risks need to be watched, particularly from a cultural, systems and regulatory perspective.
  • Going forward we see upside risks from improved NIMs from higher rates, better loan and fee growth plus provision write-backs. Maintain BUY call on UOB.



Synergistic acquisition

  • UOB is acquiring Citigroup’s Indonesia, Malaysia, Thailand & Vietnam consumer business for ~S$4.9bn. We think the 1.2x P/B is reasonable. Average Indo & Thai banks trade at 1.4x P/B where 70% of newly acquired customers reside.
  • The deal is set to double UOB’s ASEAN retail client base. Importantly, it could increase their mass-affluent customers by 81% and emerging affluent by 1.7x.
  • UOB’s mass-premium wealth management proposition should receive a critical advantage here, in our view. Pre-pandemic, ASEAN delivered 27-30% of operating income. We estimate the deal to deliver 3-4% 2023E EPS accretion.


Watch for execution and asset quality risks

  • UOB has not undertaken a major acquisition in nearly 17-years. This raises execution risks Citi customer base in a backdrop of rising competition from domestic and digital challengers.


Strongest gearing to ASEAN re-opening. BUY






Thilan Wickramasinghe Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2022-01-14
SGX Stock Analyst Report BUY MAINTAIN BUY 31.150 SAME 31.150



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