UOB - OCBC Investment 2024-02-22: Expecting Stable 2024 Outlook

• UOB (SGX:U11) reported record FY23 earnings, but this is in line with consensus expectations – 2H23 net earnings of S$2,976m was 3.5% lower than 1H23.
• While fee income received a strong boost from its credit operation, other businesses declined.

Earnings hightlights

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• Net trading income also improved from S$1,064m in FY22 to S$1,600 in FY23.
• Net interest margins (NIM) improved from 1.86% in FY22 to 2.09% in FY23. UOB's management is guiding for NIM of around 2.0% in FY24.
• Non-performing loan (NPL) ratio stayed stable at 1.5% versus 1.6% in FY22. Full year allowances jumped from S$603m in FY22 to S$921m in FY23.
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Well diversified loans portfolio

• Large institutions accounted for 55% of UOB's loan portfolio with small and medium sized enterprises making up another 11%. The remaining 34% is loans to individuals.
• In terms of geography, Singapore remained UOB's key market accounting for 49% of its portfolio, followed by Greater China at 15% and Malaysia at 10%.
• On its Greater China exposure, Chinese developers accounted for 1% of UOB's loans. The bulk of its loans is to non-bank clients, comprising largely of top-tier state-owned enterprises, large local corporates and foreign investment enterprises.
• Total commercial real estate exposure amounted to 7.5% of UOB's total loans. Of this, Singapore accounted for the bulk of 3.6% of total loans, followed by Greater China at 1.3% of total loans.

Final dividend of S$0.85.

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Carmen Lee OCBC Investment Research | https://www.iocbc.com/ 2024-02-22 SGinvestors.io

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