Analysts were resoundingly positive on United Overseas Bank’s (UOB) 1QFY2021 ended March results after it met or beat their expectations.

Maybank Kim Eng upgraded the counter from ‘hold’ to ‘buy’, with a higher target price of $29.34, while RHB Group Research upgraded from ‘neutral’ to ‘buy’ with a higher target price of $30.20. 

CGS-CIMB Research and OCBC Investment Research kept their respective ‘buy’ and ‘add’ ratings, with higher target prices of $28.84 and $29. Meanwhile, PhillipCapital and DBS Group Research kept their 'accumulate' and 'buy' ratings with unchanged target prices of $28.70 and $29.20 respectively.

Maybank Kim Eng’s Thilan Wickramasinghe highlights that UOB showed a strong operating rebound across Singapore and North Asia, noting its 24% y-o-y growth in fee income as well 5% y-o-y loan expansion.


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He believes that lower rates, increasing economic activity, and supportive markets should continue to drive momentum for the bank, despite the risk of a resurgence in Covid-19 cases in its ASEAN markets.

Wickramasinghe is also bullish on UOB’s digital banking strategy, which he believes will support stronger medium term growth.

His higher target price of $29.34 (from $26.24 previously) comes on the back of FY2021 - FY2023 EPS estimates that have been raised by 5% - 7%, as well as an increased FY2021 dividend payout assumption of 50% (from 46%) in anticipation of relaxing dividend caps.

For RHB’s Singapore research team, UOB’s 1QFY2021 earnings beat their expectations and showed a "strong improvement in fundamentals".

The team believes UOB's share price will likely consolidate in the near term, on concerns over new COVID-19 infections across the region. Nonetheless, the team views that UOB will have a stronger showing in the later half of the year. “We believe the stock price will resume rising, as the bank’s improved business momentum is sustainable, supported by its Singapore and North Asia operations. Prospects of a stronger recovery in 2HFY2021 remain intact, as vaccination drives gain pace.”

To that end, they upgraded the counter to ‘buy’, with the higher target price of $30.20 from $26.40 previously following a 2% uptick in FY2021 net profit forecasts following updated assumptions to equity risk premium and book value per share.

CGS-CIMB analysts Andrea Choong and Lim Siew Khee say UOB’s net profit of $1 billion for the quarter was in line with their estimates and mark a return to pre-pandemic levels.

Choong and Lim expect strong credit demand by large corporates and institutional clients to sustain UOB’s growth momentum over the year, placing it on track to achieve its high-single-digit loan growth target whilst maintaining a 14% CET-1 ratio.

Their target price of $28.84 (up from $27.72 previously) reflects a stronger fee income, higher loan growth and reduced impairments for their FY2021 forecasts. ”Given UOB’s stabilising asset quality outlook and deal pipeline, we foresee a return to c.10% ROE in FY2021,” they say.

For the OCBC research team, UOB is expected to continue riding the recovery through FY2021, with scope for UOB’s share price to gain ground.”Overall, we remain constructive on the financials sector and expect the recovery theme to gather strength over the course of the year, supported by progress in vaccines rollout, dividends normalization and a steepening yield curve,” they say.


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PhillipCapital's Terence Chua notes that despite earnings falling in line with his expectations, UOB's performance could have been better if not for higher than expected total allowances of $201 million for the quarter, with no write-backs despite stabilising outlook. "Despite the sizeable provisions it made in 2020, the bank has delayed the write-back of these allowances in favour of a stronger balance sheet," he says.

Meanwhile, DBS' Lim Rui Wen believes that catalysts for the counter include lower than expected credit costs that drive earnings and post-Covid ROE recovery that could further boost share price. On the flipside, risks include larger-than-expected non-performing loans and a worse-than-expected pandemic situation.

Shares in UOB closed 55 cents or 2.1% higher at $26.58 on May 7.