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4Q25 earnings of S$1,410mn were slightly below our estimates from lower-than-expected NII and other non-interest income. FY25 PATMI was 98% of our FY25e forecast. Final dividend declined 23% YoY to 71cents with FY25 dividends at S$1.81, including the 25cents capital return dividend (FY24: S$2.05, including 25cents capital return dividend). The dividend payout ratio was kept at 50%.
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NII fell 4% YoY from NIM compression of 16bps, while fee income rose 10% YoY. Allowances fell 50% from lower SPs and credit costs normalised to 19bps (4Q24: 25bps). UOB has maintained its FY26e guidance of NIM at 1.75-1.80%, low-single-digit loan growth, and credit costs at around 25-30bps but lowered fee income growth to high single (from high single to double-digit). We expect FY26e earnings to increase by ~18%, mainly driven by a recovery in fee income and a decline in allowances.
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Maintain NEUTRAL with a higher target price of S$37.00 (prev. S$36.70) as we roll over our valuations to FY26e. We lower FY26e earnings by ~5% from the lower fee income estimate. We assume a 1.26x FY26e P/BV and an ROE estimate of 10.9% in our GGM valuation. We expect UOB’s FY26e earnings to increase by ~17% YoY, driven by fee income growth and lower provisions. NIM compression will ease in FY26e as funding costs continue to improve from deposit rate cuts. Fee income will be the most significant driver from the successful integration of Citi portfolios, which will accelerate UOB’s expansion into ASEAN. UOB reaffirmed its capital return plan and will complete the remaining 68% of its S$2bn share buyback programme, or S$1.4bn.
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