UOB Bank

Kim Eng on 17 Feb 2014

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.