UOB upgraded to Outperform by Daiwa on attractive valuations

UOB branch at Raffles Place, SingaporeUOB branch at Raffles Place, Singapore. Photo taken pre-Covid.

Daiwa upgraded UOB to Outperform from Hold, pointing to “highly attractive”  valuations after the share price’s decline since its April peak.

But it added that it still preferred DBS as its top sector pick on its higher sensitivity to rising interest rates.

Last week, UOB reported net profit for the third quarter of S$1.04 billion, 17 percent higher on-year and mostly in line with analysts’ forecasts, on higher net interest income and lower allowances.

Daiwa said in the note dated Friday that the earnings missed its forecast by 4 percent on lower-than-expected non-interest income, and that the net interest margin of 1.8 percent was below its forecast of 1.83 percent.

“Management said the cost of funding has increased significantly in Singapore because it was deliberatively aggressive in gathering fixed deposits from August and September in anticipation of further increases in interest rates and heightened year-end competition from other banks,” Daiwa said, adding it expected a NIM recovery in the fourth quarter.

But it slightly trimmed its target price to S$27.70 from S$28.00.

The stock was up 0.08 percent at S$24.09 at 16:53 SGT.

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