UOB is Singapore’s third largest largest bank by total assets. As at the end of 2020, it had S$431bn in total assets and generated a net income of S$2.92bn. The bank has more than 500 offices across 19 countries and offers a range of commercial and personal banking products and services.
Rates liftoff. Markets are increasingly pricing in a March rate hike in the US after the improvement in unemployment rate last week. US 10-year yields rose to a high of 1.80% last week to reach pre-pandemic levels. In a step further, economists as surveyed by Bloomberg are now penciling in the prospect that the US Fed may even start balance sheet contraction in the second half of the year.
Positive consensus forecasts. UOB is currently trading at 1.1x FY2021F P/B and offers a 4.2% to 5.2% forecasted dividend yield for FY2021-23. EPS is forecasted to grow at an average of 21% per annum over the next three years. The street is overall bullish on the stock, with 18 BUYS and 2 HOLDS, and no SELL rating. The 12m average target price is S$31.46, implying a 11% upside potential from the last close price. We expect positive fourth quarter results due on the first week of Feb to lead to an upward rerating among banking stocks overall.
