While OCBC’s lead analyst, Carmen Lee, believes that “the worst from the oil and gas industry appears to be over”, she emphasises that the bank’s operating environment could remain tough.
“Specific allowances have come off and should start to normalise soon. Management guided that last quarter’s high tax rate is likely to come off and that they will continue to invest in IT, but will be watching staff costs. In addition, they expect wealth momentum to continue to be supported by more products,” notes Lee.
Meanwhile, CIMB analyst Jessalynn Chen highlights that about 20-30% of UOB’s trading was from opportunistic position taking, even as UOB delivered “decent” return on equity (ROE) of 10% over the quarter.
The remaining 70-80% was driven by customer flow – helped by the addition of a new time in China – and hence should be sustainable, in Chen’s view.
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“While net interest income (NII) should improve with upward net interest margin (NIM) bias, cost pressures will show up ahead and concerns surrounding UOB’s large exposure to small medium enterprises (SMEs) could limit share price upside,” she adds.
As at 10.56am, shares of UOB are trading 3.35% higher at $22.53.
