United Overseas Bank Is Now Cheaper, But More Promising

seekingalpha03-29

Fundamentally UOB is in great shape.Its investments in the region are paying off and give it a distinct advantage.For the 5.9% dividend yield, the stock is affordable.Nigel Harris /iStock Editorial ...

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href=https://seekingalpha.com/article/4681089-united-overseas-bank-is-now-cheaper-but-more-promising><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Fundamentally UOB is in great shape.Its investments in the region are paying off and give it a distinct advantage.For the 5.9% dividend yield, the stock is affordable.Nigel Harris /iStock Editorial ...</p>\n\n<a href=\"https://seekingalpha.com/article/4681089-united-overseas-bank-is-now-cheaper-but-more-promising\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"LU0955669360.SGD","symbol_name":"Schroder ISF Asian Dividend Maximiser A Dis 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SGD"},"translate_title":"大华银行现在更便宜，但更有前途","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"UOVEF":1,"UBCP":1,"U11.SI":1,"O39.SI":0.6},"content_text":"Fundamentally UOB is in great shape.Its investments in the region are paying off and give it a distinct advantage.For the 5.9% dividend yield, the stock is affordable.Nigel Harris /iStock Editorial via Getty Images Singapore-based United Overseas Bank Limited (OTCPK:UOVEF), or UOB, reported stellar results for financial 2023. Yes, net interest margin has apparently hit the ceiling but it is an industry-wide phenomenon which was widely anticipated. Fortunately, other sources of revenue picked up all at once. The economic prognosis for the region is generally optimistic, despite varying expectations on interest rate movements this year. Come what may, at the current price and dividend levels UOB stands as a fair buy. Financial update: FY2023 UOB Group continues to deliver. For the year ended 31 December 2023, core net profit (excluding Citigroup integration costs) reached a record high of S$6.1b, up a strong 26% year-on-year. The two components of profit - interest income and non-interest income - both grew, the former by 16% to S$9.7b and the latter by 32% to S$4.2b. UOB Net interest margin ('NIM') rose from 1.86% in 2022 to 2.02% by the end of 2023, although on a quarterly basis a gradual decrease - that had been expected by analysts - is evident. Operating profit expanded by 22% in Singapore and by 25% in ASEAN-4 led by Malaysia and Thailand (where Citigroup portfolios are in the process of integration). Greater consumer spending combined with a larger base of customers across the region helped lift credit card and wealth fees and, as a result, net fee income by 4%, a definite improvement given that it dropped 9% in FY22. At the same time, the loan book widened only marginally, by 2%, primarily in Thailand, Vietnam and North Asia. UOB Net profit received another boost from the positive results of treasury services and liquidity management activities, leading to other non-interest income climbing 85% y-o-y. Economic outlook In the eyes of many economists, emerging Southeast Asia remains a bright spot in the uncertain global economic climate. Even though the performance within the region is somewhat uneven with export-reliant countries recovering more slowly, ASEAN as a whole has still grown at a higher rate of over 5% for the past ten years compared to the global average of 2-3%. Its prospects should improve further in 2024. McKinsey So ASEAN-focused UOB is mildly hopeful about the new financial year. The Group forecasts an especially meaningful increase in fee income, buoyed by strong domestic demand. Loans, meanwhile, should continue expanding in low single-digits. Overall growth should be positive despite contracting interest income from some Asian markets where rate cuts are expected. The management expects to generate a NIM of about 2% for 2024. Stock performance UOVEF came down 3.65% since my initial article in July 2023; in the past twelve months, SGX:U11 lost 2.6%, while Singaporean peers DBS (D05) and OCBC (O39) gained 6.1% and 9.4% respectively. UOB's saving grace is its dividend which brought total returns for the year to positive 2.9%. The dividend amount declared for 2023 was the highest historically, yielding 5.9% at the same payout ratio. Dividend per share (cents) UOB Given the price momentum, the stock has become cheaper, with its Price/Book ratio down to 1.10x from 1.20x in 2022. While the leading DBS is more pricey at 1.5x, peer OCBC trades at around the same level. But what makes UOB a more attractive option is its edge in forecasted annual growth, which at 3.3% overshadows OCBC's 1.4%. Also, the bank's ROE hit 14.2% at end-2023, the highest since before the pandemic. UOB Conclusion The overwhelming mood in the industry is that of moderation. Growth in interest incomes has indeed peaked as evidenced by a quarterly record of net interest margins for over a year. But not all is grim. UOB, for one, managed to pull its fee income in FY2023 out from the negative territory it had been in previously; other non-interest income grew healthily too. How net interest income fares will depend on whether, and how, rates change. In ASEAN, interest rates may not exactly follow the trajectory set by the US Fed (though banks tend to refer to its decisions anyway), which could give regional banks a bit more time on the high-margin side. In this environment, UOB is staying proactive by refocusing on other revenue streams to boost growth. Macroeconomics will remain a risk, but given its reliably growing dividend payments and the fact that the stock is currently cheaper than it was before the pandemic, UOB could be a good Buy for income investors with an interest in emerging Asia.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2423050121"}