All three banks reported new highs in their share prices in January 2025, with DBS at $45.44, Oversea-Chinese Banking Corporation (OCBC) at $17.55 and UOB at $37.80, all on Jan 8.
“Since our last report in November 2024 at the share price of $33.50 and with a ‘buy’ rating, the stock has touched our fair value estimate of $37.50,” Lee writes, adding that UOB’s share price performance marked an “impressive gain” of 12.2% over a short period of about two months.
Despite the outperformance, the analyst is retaining her fair value estimate or target price of $37.50. UOB is also likely to do well in FY2025 with market expectations of fewer rate cuts in 2025.
“This could augur well for net interest margin (NIM). It could also mean that earnings have a good probability of surprising on the upside,” she says. She adds that the markets have yet to price in a better environment for NIM now that expectations of more aggressive rate cuts are lowered.
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With the improved NIM outlook, UOB’s earnings could be revised up to mid-single-digit growth instead of current expectations of flat or “marginally positive” earnings.
Lee’s unchanged target price is also due to potential key policy changes in the coming weeks from US and China. Should any changes take place, the analyst will re-assess UOB’s earnings impact.
In the 3QFY2024 ended Sept 30, 2024, UOB’s results did better than expected with net profit up 10% q-o-q and 11% y-o-y to $1.6 billion. The bank’s core net profit was up by 3% y-o-y to $4.69 billion for the 9MFY2024.
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UOB will release its 4QFY2024 and FY2024 results on the morning of Feb 19.
As at 3.50pm, shares in UOB are trading 88 cents lower or 2.34% down at $36.70.
