RBS keeps UOB (U11.SG) at Buy, raising its target price to $23.00 from $22.00. It says “UOB’s management was too conservative going into 2010. It lagged both DBS and OCBC on loan growth,” but management recently adopted a more aggressive stance and loan growth could match its peers in FY11. 

Notes profitability remains strong and likes the bank’s high asset yield (3.78% at 9M10), “which we believe should partly cushion the negative impact of low Sibor as long as assets continue to grow.”

 

Says though leverage is only 10X (FY10F), “the bank earns the highest ROE among its peers under our coverage and the highest ROA. We think this stems from the bank’s high-margin business in Indonesia, its focus on SME and credit card businesses, and its disciplined cost control.” 

 

The house adds UOB’s share price has lagged OCBC’s over the past 12 months, opening up a relatively wide valuation gap which isn’t justified. UOB is +0.1% at $19.40.