UOB - Maybank Research 2022-10-05: Strong ESG Disclosures, Net Zero Needs Clarity.

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UNITED OVERSEAS BANK LTD (SGX:U11)

UOB - Strong ESG Disclosures, Net Zero Needs Clarity.

• UOB scores a 74 under our enhanced ESG 2.0 scoring, placing it firmly above average. The Group’s quantitative ESG disclosure levels are high boosting transparency.
• Nevertheless, UOB is yet to articulate a clear pathway, timeline or interim targets towards Net Zero. We believe disclosures here as well as improving the mix of independence and diversity in its Board could result in a higher score.
• With an improving outlook on net interest margins together with strong capital levels and provisioning, maintain BUY.

Strong levels of disclosure and transparency

• UOB (SGX:U11)’s quantitative ESG disclosures are the most extensive compared to domestic peers. This significantly improves transparency and risk measurement. However, there is no disclosure on its Scope 3 financed emissions or a time-bound target on when this may become available.
• Separately, UOB is the first domestic bank to achieve carbon neutrality on its operations and has a continuing target to maintaining this emissions profile.
• We also note UOB’s asset management and venture capital divisions are aligning their portfolios towards low carbon factors, while also practicing stewardship with increased engagement in investee companies on ESG topics.

Clearer pathway needed for Net Zero

• UOB’s pathway towards Net Zero and interim targets are not clear, unlike peers such as DBS. More details here could support a higher scoring, in our view. At the same time, increasing the proportion of independent directors at the Board as well as raising diversity (only 20% of the Board is female) could further strengthen governance, we believe.
• Separately, we believe UOB’s investment in technology as well as its large, SME client base gives it significant opportunities for enhancing financial inclusion across the region.

Strong ASEAN footprint. Maintain BUY

• While NOII is likely to remain under pressure in the context of current market conditions, we believe rapidly improving NIMs from Fed hikes should provide an offset.
• At the same time, UOB’s gearing towards secular ASEAN growth driven by domestic consumption as well as North-South supply chain shifts should support medium term earnings visibility.
• While asset quality under slow economic conditions remain a risk, UOB’s strong capital and provisioning offers buffers. Maintain BUY rating on UOB.
• See
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• Read also:
  • DBS Group - Maybank Research 2022-10-05: High Levels Of ESG Disclosures, Plus Dividends.
  • OCBC Bank - Maybank Research 2022-10-05: Good ESG Disclosure Levels, Could Be Better.

Thilan Wickramasinghe Maybank Research | https://www.maybank-ke.com.sg/ 2022-10-15

SGX Stock Analyst Report BUY MAINTAIN BUY 32.280 SAME 32.280