CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Analysts lower UOB share price targets as coronavirus cases surge

Analysts recently lowered their earnings and share price estimates for the Singapore bank, following coronavirus-driven interest rate cuts around the world.

Since our last full update, United Overseas Bank's (UOB) share price has fallen another 17%, as of 9am on Tuesday 10 March.

UOB’s shares opened at S$21.31 a share right out of the gate, extending the already-steep loss of the previous day. This is the Singapore Blue-Chip stock’s lowest buy-in level since March 2017.

Share price had sunk over 8% on Monday 09 March to close at S$21.52 per share.

Reduced net interest margin and lower loan growth estimates

As the coronavirus continues its spread across the globe and to impact financial markets, several local equity analysts have revised their share price targets and gradings on UOB.

CIMB analysts had on 04 March downgraded their rating on the stock to a ‘hold’ from ‘buy’, alongside a lower share price target of S$24.91 per share, versus S$28.39 previously.

The rating is based on a reduced net interest margin (NIM) forecast by 10 to 12 basis points (bps), which was posted after the US central bank’s emergency interest rate cut of 50 bps last week as a countermeasure against a coronavirus-driven economic recession.

Go long or short on UOB stocks by trading CFDs on IG's industry-leading platform. Sign up for an account today.

With further rate cuts a possibility, CIMB analysts have consequently lowered their regional loan growth estimates for UOB to ‘2-3% in FY20F on the broad cautionary stance on business expansion’.

They also raised credit costs estimates to 26-30 bps, up from 25-29 bps previously, as they believe that non-performing loans (NPLs) ‘could start to emerge prominently as COVID-19 turns pandemic, given the banks’ Greater China exposure (supple chain disruption) and SME portfolios’.

UOB’s 2020 earnings to be further hit by interest rate cuts

Following the US Federal Reserve’s interest rate reduction, DBS’ research team has also lowered its call on the UOB stock from a ‘buy’ rating to a ‘hold’, alongside a lower target price of S$25.50 – against S$27.20 previously.

In the wake of the Fed’s move, as well as Hong Kong’s rate cut in tandem, DBS researchers believe that there are more Singapore Interbank Offered Rate (SIBOR)/ Singapore Dollar Swap Offer Rate (SOR) downsides in store.

‘While impending decline in cost of funds will cushion decline in loan yields, we believe overall NIM will still see further pressure’, they wrote in a new research note. As a result, they have lowered their earnings forecast for UOB by 2% on a 2bps drop in NIM to 1.71%. In 2019, UOB achieved a 1.78% NIM rate.

They added that while UOB is likely to keep leveraging on its strong capital position to capture cross-border loan growth opportunities amid a slower growth environment, there are ‘limited catalysts on the stock for now’ given the expected NIM pressures and ongoing COVID-19 uncertainties.

Despite a lower earnings estimate, DBS analysts maintain that UOB is likely to sustain its S$1.30 per share full-year dividend for FY2020, if a second-half recovery takes place as expected at present. Furthermore, the group is on track to launching its digital-only bank called TMRW in Indonesia later this year, which should help cushion any adverse impacts to business so far this year.

UOB’s share price closed at S$21.94 per share on Tuesday 10 March.

Trade UOB shares and other Singapore blue-chip stocks via IG's market-leading trading platform. Sign up for an account today.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Act on share opportunities today

Go long or short on thousands of international stocks with CFDs.

  • Get full exposure for a comparatively small deposit
  • Trade on spreads from just 0.1%
  • Get greater order book visibility with direct market access

See opportunity on a stock?

Try a risk-free trade in your demo account, and see whether you’re on to something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See opportunity on a stock?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Trade a huge range of popular stocks
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See opportunity on a stock?

Don’t miss your chance. Log in to take advantage while conditions prevail.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.