Date: 14 October 2024
Broker: UOB Kay Hian Private Limited
Company Overview
Founded in 1935, United Overseas Bank (UOB) has established a solid regional presence across Southeast Asia, including key markets such as Singapore, Malaysia, Indonesia, Thailand, Vietnam, Hong Kong, and Mainland China. UOB is a market leader in Singapore, especially in credit and debit card services and SME loans. Its diversified operations also extend into wealth management and trade finance, making it a significant player in the financial services industry.
Stock Data
- Share Price: S$31.92
- Market Cap: S$53,374.1 million (US$40,799.7 million)
- Shares Issued: 1,672.1 million
- 3-month Avg Daily Turnover: US$65.0 million
- 52-week High/Low: S$33.38/S$26.82
Price Performance
- 1 month: +0.1%
- 3 months: -3.6%
- 6 months: +7.8%
- 1 year: +11.8%
- Year-to-Date (YTD): +12.2%
Major Shareholders
- Wee Cho Yaw: 18.5%
- Wah Hin & Co: 5.2%
Financial Metrics
- Net Asset Value (NAV)/Share: S$26.64
- CET-1 CAR: 13.4%
Key Strategic Targets
UOB aims to achieve a Return on Equity (ROE) of 14% by 2026, compared to 13.7% in 1H24. The bank plans to meet this target by focusing on:
- ASEAN Expansion: Increasing the contribution from ASEAN-4 countries (Malaysia, Thailand, Vietnam, and Indonesia) to 30% of total income, up from 25% in 1H24. UOB will maintain at least 50% of its total income in Singapore.
- Non-Interest Income Growth: Raising the proportion of non-interest income to 37% of total income by 2026 (from 32% in 1H24), driven by wealth management, trade finance, and treasury product flows.
- Cost Efficiency: Improving the cost-to-income ratio (CIR) to 40% by 2026 (from 41.8% in 1H24), mainly by offshoring back and middle office functions to Malaysia.
Key Developments and Initiatives
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Regional Growth and Trade Benefits: UOB is well-positioned to benefit from trade realignments due to the U.S.-China trade conflict and the strengthening of regional currencies against the Singapore Dollar (SGD). In 3Q24, the Malaysian Ringgit (MYR) strengthened by 8.2%, the Indonesian Rupiah (IDR) by 2.5%, and the Thai Baht (THB) by 7.4%, which supports higher ASEAN contributions to UOB’s overall performance.
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Renaissance in Malaysia: UOB is the sixth-largest commercial bank in Malaysia, contributing 10.3% of total income in 1H24. The bank focuses on four key growth corridors—Johor, Klang Valley, Penang, and Sarawak. Notably, Penang has attracted significant foreign direct investment (FDI) from the semiconductor industry, including major players like Intel, which bodes well for UOB’s growth in the region.
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Technology and Innovation: UOB has launched its Innovation Hub 2 (IH2) in Kuala Lumpur, a state-of-the-art technology center employing more than 1,000 staff. This hub provides infrastructure support, application development, and other services. It spans five floors and occupies a 74,000 square foot space.
Financial Highlights
- Net Interest Income: Increased from S$6,035 million in 2020 to S$9,679 million in 2023.
- Non-Interest Income: Grew from S$3,141 million in 2020 to S$4,253 million in 2023.
- Net Profit: Reported net profit rose from S$2,915 million in 2020 to S$5,711 million in 2023.
- EPS: UOB’s earnings per share (EPS) increased from 169 cents in 2020 to 334 cents in 2023.
- PE Ratio: Improved from 18.9x in 2020 to 9.6x in 2023.
- Dividend Yield: UOB’s dividend yield increased from 2.4% in 2020 to 5.3% in 2023.
Strategic Goals
UOB is poised to benefit from the economic growth in ASEAN, driven by the relocation of supply chains and strengthened regional currencies. The bank’s strategic focus includes increasing its ASEAN-4 contributions and leveraging digital transformation and technological advances.
