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
- Overall, we creates strong opportunities for credit cards and mass wealth products especially as interest rates rise.
- UOB’s strong regional wholesale integration stand to benefit from North-South supply chain shifts and increasing capacity additions. Maintain BUY.
- See
Thilan Wickramasinghe
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2022-01-14
SGX Stock
Analyst Report
31.150
SAME
31.150
