United Overseas Bank Limited: Stellar performance across all segments February 21, 2018 1870

PSR Recommendation: BUY Status: Upgraded
Target Price: SGD29.00
  • 4Q17 PATMI of S$855mn is in line with our estimate.
  • NII increased 15% YoY on the back of robust loans growth and higher NIM.
  • WM fee income grew 29% YoY on higher contribution by HNW segment.
  • Higher specific provisions were offset by reversal of excess general provisions.
  • Upgrade to BUY (previously ACCUMULATE) with a higher target price of S$29.00 (previous TP S$25.22) based on Gordon Growth Model.


The Positives

+ Loans growth 5% YoY and NIM expanded 12bps YoY. Manufacturing and Financial institution loans registered strong double digit loans growth YoY. Housing loans growth was steady at c.6% YoY. NIM was higher on the back of higher rates on customer loans and interbank balances.

+ WM fees grew 29% YoY. We believe the stronger fee income was due to stronger contribution by the HNW segment. Total WM income from the HNW segment saw a full year growth of 35% in 2017 compared with the mass affluent segment which grew 12%.

+ Exposure to upstream O&G sector reduced and portfolio cleaned up. Exposure to upstream O&G sector was reduced to S$3.8bn in 4Q17 from S$4.3bn in 3Q17. New NPA formation spiked to S$1.2bn in 4Q17 compared to S$0.8bn in 3Q17 as more O&G exposure was cleaned up. As a result, NPL ratio increased to 1.8% compared to 1.6% in 3Q17. Higher specific provision expense during the quarter was offset by a reversal of excess general provisions which resulted in a low provision expense of S$140mn in the 4th quarter.

The Negatives

– UOB Indonesia continues to be loss-making in 4Q17. UOB Indonesia’s weak top-line growth continues to be a drag as expenses continue to rise and allowances stay elevated. Recall in 3Q17, the higher allowance was needed to conform to regulatory changes in classification of non-performing loans.


We upgrade our FY18e NIM target to 1.9% from previous estimate of 1.81% but we maintain loans growth at c.6%. With a higher NIM outlook, we revise our FY18e PATMI growth estimate to c.13% (previously c.10%).

Valuation: Gordon Growth Model


Investment Actions

Upgrade to BUY (previously ACCUMULATE) with a higher target price of S$29.00 (previous TP S$25.22).

Notify of
Inline Feedbacks
View all comments

About the author

Profile photo of Jeremy Teong

Jeremy Teong
Investment Analyst
Phillip Securities Research Pte Ltd

Jeremy covers primarily the Banking and Finance sector. He has 6 years’ experience in equities related dealing and research roles.

He graduated with Bachelors of Mechanical Engineering from Nanyang Technological University.

Get access to all the latest market news, reports, technical analysis
by signing up for a free account today!