We like UOB’s control over their exposure to risky loans and how they manage provisions for non-performing loans. We see that UOB is beginning to exercise some pricing power in the loans business by turning down low margin businesses. However, we remain cautious that the tailwind of strong funding liquidity and low deposit costs may not continue indefinitely. We see that the improvements to the NPL formation within the offshore oil and gas largely priced in. Excluding the outperformance in trading income, net profit would have been flat. Maintain “REDUCE” with a higher target price of S$19.20 (previously S$18.92). Our target price is based on unchanged 0.95x FY17F book value (excluding preference shares).