UOB - RHB Invest 2024-08-22: Aiming To Sustain ROEs Through A Rate Cut Cycle

• UOB (SGX:U11) held its Corporate Day 2024 last week, with the key financial highlight being its 2026 medium-term ROE target of 14%. Compared to its core FY23 ROE of 14.2%, UOB essentially thinks this level can be sustained through the rate cut cycle.
• - Read this at SGinvestors.io -
• We keep our more conservative earnings forecasts, for now.

Sustaining ROE through a rates downcycle.

• Several broad key assumptions UOB has made in deriving the above 14% ROE target include:
  • - Read this at SGinvestors.io -
  • 3% opex CAGR from improved cost efficiency and productivity;
  • credit cost of 25-30bps (FY23: 25bps) – potentially lower should economies in its major markets continue to improve; and
  • 50% dividend payout ratio. UOB thinks this is an optimal mix as it believes its main markets continue to offer good growth opportunities and the capital retained should be able to support volume growth of 7-8%.

Income growth – pivoting to an asset-light business model.

• Read more at SGinvestors.io.

Singapore Research RHB Securities Research | https://www.rhbgroup.com/ 2024-08-22 SGinvestors.io

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