United Overseas Bank (UOB SP)

Lifted by lower taxes
 While bottomline surpassed our estimate, operating lines met our expectation.
 Directionally, the operating trends echoed that of DBS and OCBC with sequentially higher NIM (+3bps), strong loan growth, resilient underlying credit quality.
 Maintain BUY with a SGD23.60 TP (previously SGD23.40), based on 13x FY14E core EPS.
Ahead of expectations on lower taxation
UOB reported 4Q13 core PATMI of SGD773m (+5.9% QoQ, +11.1% YoY), beating our and consensus estimates. The results would have met our forecast if not for a lower-than-expected taxation. We fine tune our FY14-16 EPS by 1% after incorporating FY13 data.
No surprises key operating metrics remain steadfast
Net interest margin (NIM) improved to 1.74% (+3bps QoQ, -2bps YoY) in 4Q13, its best in four quarters. The QoQ increase ? larger than the 1bp recorded by both DBS and OCBC ? was evidenced for its operations in Singapore (+1bp), Malaysia (+3bps), Thailand (+12bps) and Greater China (+1bp).
Similar to sector peers, UOB?s loan expansion (on constant currency terms) strengthened by 3.4% QoQ or 18.2% YoY, fuelled by regional markets (+7.0%, +16.8%) and Singapore (2.2%, 17.7%).
Asset quality held up well with NPL ratio of 1.1%, its best in more than 16 years. Overhead expenses remained well managed, which helped to keep cost-income ratio in check at 43.5% (2012: 42.4%, 2011: 42.9%).
We maintain our BUY call on UOB. Our SGD23.60 TP (previously: SGD23.40) is based on 13x FY14E core EPS ? consistent with its rolling P/E mean since 2005.

Source : Maybank Kim Eng

UOB Ends 2013 with Record Earnings Of S$3 Billion
By Stanley Lim, CFA - February 15, 2014 | See also: U11



United Overseas Bank (SGX: U11) released its full-year results for 2013 yesterday evening and achieved a net profit of S$3.01 billion, a 7.3% increase over 2012. UOB, one of Singapore?s largest banks, has more than 500 offices in 19 countries and territories in Asia Pacific, Western Europe and North America. As of this year, overseas contributions account for more than 40% of the bank?s earnings.

Performance in 2013

The bank ended 2013 with a 3.5% increase in its total income (i.e. ?sales) to S$6.72 billion. There are a few segments to UOB?s total income, namely net interest income, fee and commission income, and other non-interest income. For the year, fee and commission income was the standout performer as it grew by a stellar 14.8% to S$1.7 billion. This increased the fee portion of total income to 25.8% for the year.

UOB?s net interest income managed to increase by 5.2% to S$4.12 billion even as its net interest margin ? a measure of the profit margin for a bank ? dropped from 1.87% to 1.72%.

The bank?s expense-to-income ratio also increased from 42.3% to 43.1%. This has been the highest the ratio has been for the past 4 years. Going forward, Investors might want to pay attention to the ratio to ensure that management has a handle on costs.

In terms of the geographical breakdown of the business, Singapore is still the largest contributor, with 61% of the bank?s total pre-tax profit, down from 67% in 2012. UOB?s second largest market is Malaysia, contributing 15% to the bank?s pre-tax profits. The fastest growing regions have been Thailand and Greater China. Both grew pre-tax profits by more than 20% in 2013.

UOB?s loans-to-deposit ratio continues to be in a strong and stable position of around 88.5%, though it has increased from 84% in 2012. In addition, the bank?s loan portfolio has strengthened, based on the decrease in its non-performing loan ratio from 1.5% to 1.1%.

Since the start of 2013, Basel III rules have been enforced regarding the capital requirements on banks. The Monetary Authority of Singapore has also put in place its own set of stricter requirements, which sees a bank having to maintain a Tier 1 and Total capital adequacy ratio (CAR) of 6% and 10% respectively. On that front, UOB has more than met the requirements with a Tier 1 and Total CAR of 13.2% and 16.6% respectively. Though, it must be noted that its CARs have gone down since 2012, when its Tier 1 and Total CARs were at 14.7% and 19.1%.

Earnings, dividends and what lies ahead

With record earnings of S$3.01 billion this year, the bank declared a dividend of S$0.75 per share for 2013, a 7% increase from the S$0.70 per share dividend declared in the previous year.

UOB expects business to be growing more moderately going forward. With the tapering of the United States Federal Reserve?s Quantitative Easing programme in the near future, it indicates the recovery of the US economy, which should be very positive for Asian markets as well. The bank is confident in the economy in Asia and is committed to its long term strategy.