While the analysts believe UOB’s 1QFY2025 ended March 31 results may be supported by its previous FY2025 guidance, they see that the bank may report softer loan growth and non-interest income growth amid volatile macroeconomic conditions for the rest of FY2025.
During the year, loans are expected to grow by 4.9% y-o-y, down from 7.2% previously, while fee and commission income is expected to grow by 7.3% y-o-y compared to the analysts’ previous estimate of 14.9% before.
Total credit cost is also expected to increase at 35 basis points (bps) for FY2025, compared to 28 bps previously. The higher estimate is to account for potential general provision (GP) recognition given the deteriorating global economy, the analysts write. That said, UOB is still likely to see a 3.4% y-o-y growth in its overall net profit for FY2025.
In 1QFY2025, Tay and Lim estimate UOB’s total income to come in at $3.69 billion, 4.7% higher y-o-y and 6.6% up q-o-q,
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“Given UOB’s previous loans growth guidance of the high single-digits for FY2025 during its FY2024 results briefing in February 2025, we expect loans growth to see a slight q-o-q growth in 1QFY2025 to support its flat q-o-q net interest income (NII) and higher loan and trade-related fee income,” they write.
“UOB’s double-digit fee growth guidance for FY2025 should also be supported by wealth management fees,” they add.
That said, the bank could adopt a “more prudent approach” by recognising a higher GP during the quarter from the macroeconomic uncertainties. This comes after a write-back of GP of around $277 million in 4QFY2024.
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As such, the analysts expect UOB’s 1QFY2025 net profit to grow by 5.1% y-o-y with limited leverage from its total income growth.
In addition to their lowered EPS forecasts, the analysts are also reducing their return on equity (ROE) assumptions to 12.5% from 13.5% to account for the uncertain economic outlook.
Despite the downgrades, the analysts are maintaining their “add” call on the bank as they see UOB’s FY2025 yield of 7.2% as “attractive and defensible”. The bank pledged a special dividend of 50 cents per share as part of its $3 billion package to return surplus capital, which will be paid out in May and August, respectively.
As at 12.53pm, shares in UOB are trading 49 cents higher or 1.41% up at $35.29.
