UOB

UOB: Recent share price decline as recent soft economic data seems to point towards possibility of a delay in rate increase. Market concerns that the local banks may not be able to enjoy higher interest margins for this year. OCBC expects net interest margins to stay relatively flat for the rest of year from levels seen in 1Q15.

Outlook for UOB remains challenging, especially in Malaysia and Indonesia. OCBC expects loan growth to moderate from strong double-digit growth in FY01-14 to mid-single digit level in FY15. They also expect technology and staff costs to remain elevated, but should be compensated by higher cross-selling of products and services in the region.

OCBC sees the recent price weakness has opened up opportunities as they see value emerging. At current price of $22.80, valuations are not demanding at 1.2x book, 11.0x FY15 earnings and with a dividend yield of 3.3%. OCBC upgrades UOB to BUY and maintain a TP of $25.20.