UOB - NIM Expansion & Lower Credit Cost; A Resilient Showing
- UOB (SGX:U11)’s net profit of S$1.02bn was in line with our/consensus estimates.
- NIM expansion of 1bp q-o-q to 1.57% and lower credit costs of 12bp in 4Q21 offset weaker treasury income due to softer trading conditions at year-end.
- Stronger fee income, ~S$200m-300m profit from integration of Citigroup’s consumer franchise and ~23 bp NIM expansion to drive UOB's FY22-24F earnings.
- Credit costs guided to be stable, with specific provisions from residual risks smoothened by general provision reversals. UOB is likely to retain sizeable part of ~S$1bn mgmt. overlays. UOB lowered loan growth guidance to mid-single-digit in FY22F and we deem credit cost commentary to be slightly negative.
- Reiterate ADD call on UOB with a higher target price.
- UOB's share price trades at ~1.2x FY22F P/BV, still below its 1.4x valuation as NIM peaked in Apr 18 during the last rate hike cycle.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
Andrea CHOONG CGS-CIMB Research | LIM Siew Khee CGS-CIMB Research | https://www.cgs-cimb.com 2022-02-16 2022-02-16
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