UOB shares fall despite solid first-quarter results amid shade from DBS

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UOB shares fell on Thursday, with analysts saying the bank’s solid first-quarter results still paled in comparison with larger peer DBS’ break-out quarter.

Net profit for the first quarter rose 21 percent on-year to S$978 million, the smallest of Singapore’s three banks said in a filing to SGX before the market open on Thursday. That compared with market expectations for net profit of around S$981 million for the quarter. The net interest margin (NIM) was 1.84 percent, up 11 basis points, on higher loan margin and interbank yields amid a rising interest rate environment and proactive balance sheet management, UOB said.

But analysts said that while solid, DBS had a better first quarter, reporting on Monday that its net profit surged 26 percent to a record S$1.52 billion and handily beating forecasts.

Shares of UOB were down 1.43 percent at S$29.56 at 4:13 P.M. SGT on Thursday. DBS was down 4.51 percent at S$29.22 as the stock went ex-dividend. OCBC, which hasn’t yet reported earnings, was off 1.50 percent at S$13.75. The broader market was also lower amid negative leads from Wall Street.

Both UOB and OCBC had ridden DBS’ coat-tails higher after its earnings report earlier in the week.

RHB said in a note on Thursday that it was still positive on UOB shares, pointing to the prospects for even higher NIMs. The brokerage said it was forecasting NIM of 1.86 percent for this year and 1.92 percent for 2019 as Singapore interest rates appear set to rise.

It raised its target price to S$33.30 from S$30 on a higher return on equity (ROE) assumption due to a more optimistic NIM outlook and the prospect of higher dividends. It kept a Buy call.

RHB noted that UOB’s common equity tier 1 (CET1) capital adequacy ratio had risen to 14.9 percent, from 12.8 percent in the year-earlier quarter, adding that management was guiding that could fall below 14 percent by the end of 2019, with a dividend payout increase a possible contributor.