UOB (SGX:U11)’s 9M22 earnings beat Street and MIBG expectations driven by higher margins and lower provisions. We think NIM expansion is set to continue supported by tailwinds from central bank interest rate hikes.
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Maintain BUY recommendation on UOB with higher S$33.77 target price.
NIM trajectory set to rise further
UOB's 3Q22 reported NIM expanded +40bps y-o-y propelled by Fed and regional central bank rate hikes. Loan margins saw the sharpest q-o-q increase (+32bps vs +5bps 4Q21-2Q22). We expect momentum here to persist as central banks continue to hike in order to tackle inflation.
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We have raised 2022-24E NIM assumptions by 10-13bps. However, we do expect NIM expansion to begin decelerating from 2023E onwards as interest rate hikes slow and funding costs settle at a higher rate.
Our loan growth assumptions are unchanged. We expect growth momentum to slow under potential recessionary conditions, but NIM growth should provide more than an offset going forward.
Asset quality, credit costs need to be watched
Read more at SGinvestors.io.
Above is an excerpt from a report by Maybank Research. Clients of Maybank Securities may be the first to access the full PDF report @ https://www.maybanktrade.com.sg/.
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