Company Name: UNITED OVERSEAS BANK LTD
| Research House: CIMB | Price Call: HOLD | Target Price: 22.47 |
CIMB downgrades UOB to Neutral from Outperform. “With the highest SGD LDR among local peers, UOB should be the hardest hit in the war for deposits. UOB is probably in deposit gathering mode right now and has been offering attractive fixed deposit promotions. We anticipate above-peers’ NIM compression.”
It notes SME and mortgage competition has capped lending yields in UOB’s typical lending markets, expecting UOB’s NIM gap with peers to gradually close. But it adds, catalysts could come from sustained fee strength, with the bank attempting to monetize relationships from its regional platform.
The stock’s outperformance post-results has largely captured positives from a strong 2Q12, trading at 1.26x 2013 P/BV, which appears fair on a regional comparison basis. It lowers its FY12-14 earnings by 0.2%-0.7% in anticipation of NIM erosion, but raises its target to $22.47 from $21.97 after rolling to 2013 valuations. The stock is down 0.2% at $19.62.
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