UOB

UOB: 2Q12 results above. Net profit was $713m, +4% qoq, lifted by AFS invmt gains and healthy fees, but loans grew just +1.4% qoq, and NIMs softened 6 bps qoq to 1.92%, on a 10bps qoq fall in loan yields. Net interest income declined 1.7% qoq. The drop in NIMs was evident across all three banks this quarter, a sign of increased competition and possibly funding tightness. UOB’s LDR continued to inch higher at 87.1%, from 86% qoq, as overall deposit growth was flattish qoq with regional deposits up 4.2% qoq, while SGD deposits declined 2.1% qoq. Asset quality remained stable, at 12.3% core tier 1 capital ratio. UOB declared $0.20 div, unchg yoy. Looking ahead, UOB now expects high single digit loan growth vs the low teens guidance previously. OCBC gave a similar guidance while DBS reduced its earlier mid teens guidance to ~10%. UOB also expects NIM pressure in upcoming quarters albeit at a less severe degree than 2Q12. In contrast, just 3mths ago, it was hopeful of margin expansion driven by improving loan pricing power. UOB confirmed it is looking to buy Asian asset mgt business of ING, and is actively looking for acq in the wealth mgt area, though it will continue to grow organically in the meantime. Separately, UOB also announced that Mr Wee Cho Yaw would relinquish his role as Chairman in Apr ’13. He will be replaced by Mr Hsieh Fu Hua, whose former positions incl CEO of SGX, and president at Temasek Holdings. Mr Wee will stay on as a director and be bestowed title of Chairman Emeritus. This pave the way for a smoother succession by his son Mr Wee Ee Cheong (CEO since 2007). UBS, Deutsch rate at Neutral with TP $19.50, $19.00 respectively. Citi has a Sell, but raises TP to $18.10 from $17.70. Nomura rates at Buy with TP $22.60. HSBC maintains at Overweight with highest TP in the Street at $24.30. Tips as favorite bank.