UOB

UOB's Net profit of $730m (-7% q/q, +3% y/y) was above estimates as weaker trading/investment income was mostly offset by lower than- expected credit costs and operating expenses. Net interest income at $1.05b (+8% y/y, +r3% q/q), on back of a flat NIM and a +2% q/q loan growth. Non-interest income came in at 693m (+11% y/y, -2% q/q), led by lower fee income, while Provisions were up 3% QoQ as asset quality remained stable. The NPL ratio remained stable at 1.2%, while loan growth was driven by Singapore (+2% QoQ) and Greater China (+6% QoQ).In overseas exposures, the bank is seeing some short-term uncertainty in Thailand, with margin pressure and moderate growth seen in Indonesia with not much liquidity concern. Regarding an expansion or potential M&A’s in HK, the key attraction of the HK banking market remains its cross-border business flows with China and particularly the Pearl River Delta region. Whether there is any opportunity for acquisition will depend on any potential synergies in generating customer flows from HK into SE Asia and, more importantly, the price must be right. UOB sees no margin uptick in the near term as it maintains short tenor given that QE tapering will eventually happen. Going forward, management maintains its FY14 guidance for core earnings drivers: high single-digit loan growth, flat NIMs at least in 1H14 and overall credit costs expected to remain at 30 bp (annualised). Guide that regional growth rates could face some near-term uncertainty. Latest broker ratings as follows: Maybank-KE maintains Sell with TP $20.50 CS maintains Neutral with TP $22.00 Deutsche maintains Hold with TP $23.00 HSBC maintains Neutral with TP $22.35 CLSA maintains Buy with TP $24.20