UOB's share price is down 9% year-to-date, underperforming peers and the market barometer. At 0.9x FY24F P/BV, concerns over reversal in NIM trajectory and asset quality pressures are priced in, in our view.
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Headwinds manageable – revenue and asset quality.
UOB sees two key headwinds – revenue and asset quality.
The revenue headwinds from the reversal of the bank’s NIM trend (-8bps q-o-q) and moderating loan growth, have surfaced in 1Q23. Still, UOB's management expects to sustain NIM at 1Q23’s level of 2.14% as cost of funds stabilises in 4Q23, while the 25bps hike in the Federal Funds Rate (FFR) in May 2023 and a pick-up in loan growth in 2H23 (China’s reopening) should help. In 1Q23, UOB’s loans contracted 1.2% q-o-q as the rise in interest rates prompted some borrowers to pay down their mortgages.
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Citi acquisition progressing well.
Read more at SGinvestors.io.
Above is an excerpt from a report by RHB Securities Research. Clients of RHB may be the first to access the full PDF report @ https://www.rhbtradesmart.com/.
