- Downgrade UOB to NEUTRAL from ACCUMULATE with a lower target price of S$34.60 (previously S$36.30) as we lower FY25e earnings by ~4% from lower NII and fee income estimates.
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- NII dipped 3% from NIM compression of 14bps, while fee income rose by 3% y-o-y. Allowances up 20% from higher SPs, mitigated by pre-emptive provisions. UOB has provided FY25e guidance for NIM of 1.85-1.90%, low-single digit loan growth, high-single digit fee income, and credit costs at around 25-30bps from a top-up in GP buffer. We expect FY25e earnings to decline by ~4% as margin compression continues.
The Positive
Non-interest income is the only positive.
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- Other non-interest income grew 8% y-o-y and was supported by higher customer-related treasury income and improved trading and liquidity management performance. Overall, non-interest income rose by 5% y-o-y.
The Negatives
NII declines from NIM compression.
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