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. Treasury 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.
Acceleration of 5 years target. On 14 Jan, UOB announced that it was going to acquire Citigroup’s consumer businesses in Indonesia, Malaysia, Thailand and Vietnam for around S$4.9bn. According to UOB, the acquisition will double its existing retail customer base to about 5.3mn post acquisition, and accelerate UOB’s customer base target five years ahead of time. Citigroup’s consumer business in these four countries has a net asset value of about S$4bn as at end June 2021, a custom rbase of about 2.4mn and generated S$500mn income in 1H2021.
Positive consensus forecasts. UOB is currently trading at 1.2x FY2021F P/B and offers a 4.0% to 4.9% forecasted dividend yield for FY2021-23. EPS is forecasted to grow at an average of 22% per annum over the next three years. The street is overall bullish on the stock, with 17 BUYS and 2 HOLDS, and no SELL rating. The 12m average target price is S$31.96, implying a 7% upside potential from the last close price. We expect positive fourth quarter results due in the first week of Feb to lead to an upward rerating among banking stocks overall.
