UOB

UOB: PhillipCapital maintains an Accumulate rating with $23.03 TP, as House continue to be positive on UOB’s overall resilient earnings and growth traction from their overseas exposure through their regionalisation agenda. UOB has been focusing on their regional franchising, particularly on larger SMEs seeking solutions for intra-regional trades and growth. House are positive on UOB’s ability to offer value-added services to their target group through their strong cross-selling capabilities and setting up of foreign direct investment units. Management also remains cautious as they have guided that they will continue to trim down their long term securities exposure in preparation for QE tapering. Credit costs are expected to remain benign as management guides for customer selections to remain rigorous and conservative through lower loan-to-value ratios and also the focus on short-term trade-related loans. However, PhillipCapital remain cautious on ASEAN countries like Thailand and Indonesia which might affect UOB in the near term. Slowdown of mortgage originations as guided by management to be 30%-40%, will create some drag on loans growth in FY14 and UOB’s housing loans book make up 28% of total loans, which is higher compared to its peers, but overseas corporate loans growth will help mitigate this, excluding currency effects.