UOB

UOB: 3Q14 results beat consensus estimates, with net profit at $866m (+18.7%) versus average analysts forecasts of $746m, led by strong loans growth, fees, net trading and investment income. Net interest income rose 10.5% to $1.2b, led by higher loan growth (+11%) in Singapore and the regional countries, while net interest margin improved 1 b.p. to 1.71%. Non-interest income jumped 32.1% $816m, with fee and commission income up 16.8% to $475m, driven by strong growth in fund management, loan related businesses, wealth management and investment banking. Trading income more than doubled to $222m, primarily from treasury gains. Total expenses was up 11.9% y/y to $800m but increased marginally by 1.6% from 2Q14. Impairment charges jumped 90.5% to $162m, due to a few specific non-performing loan accounts in Thailand and Indonesia. Asset quality was healthy, with NPL ratio unchanged at 1.2%, while NPL coverage remained strong at 146.8%. Customer deposits rose 8.7% to $224m and the loan-to-deposit ratio was at 85.8% (3Q13: 84.0%, 2Q14: 87.8%). ROE improved to 12.9% (3Q13: 11.7%, 2Q14: 12.5%), while capital adequacy ratios remained strong with fully-loaded CET1 CAR of 14.0% (above minimum 9%) and total CAR at 17.0.%. Management noted that its good set of results was in part due to its continued discipline in balance sheet management and investment in fee-generating capabilities, and the recent award of a branch banking licence in Myanmar reinforces UOB’s commitment to the region and its investments in serving customers’ needs. UOB trades at 1.36x P/B versus OCBC’s 1.34x and DBS’ 1.27x. Latest broker ratings: Maybank-KE maintains Hold with TP $25.30 CIMB maintains Hold with TP $23.79 Deutsche maintains Hold with TP $23.00 HSBC maintains O/w with TP $26.95 JP Morgan maintains U/w with TP $22.00 OCBC maintains Buy with TP $24.20