Are UOB shares worth buying?

• United Overseas Bank (SGX: U11) share price closed 1.3% lower on Wednesday (08 September 2021)
• The bank's shares rallied to a week high of S $ 25.81 this week
• Its overseas subsidiaries UOB China and UOB Indonesia have secured yuan and rupiah cross-currency dealership licenses
• The stock has a potential 16% upside, according to the latest analyst price targets
• Keen to trade UOB shares? Open an account with us to start trading the stock.

Why did UOB stock price climb this week?

UOB shares rallied as much as 1.3% this week, after its Chinese and Indonesian units secured cross-currency licenses.

Singapore's third largest bank said on Monday that its wholly-owned subsidiaries UOB China and UOB Indonesia have secured licenses to be appointed cross-currency dealers (ACCD) for the Chinese yuan (CNY) and Indonesian rupiah (IDR).

This makes UOB the first Singapore bank to hold the CNY/IDR ACCD status in both markets. UOB China is also the only Singapore-headquartered bank approved by the People's Bank of China (PBC) to be a CNY/IDR direct market maker.

The licenses will allow UOB China and UOB Indonesia to open offshore accounts in rupiah and yuan respectively, as well as offer cross-currency exchange, financing, swaps and forwards in the currency pair to its corporate and institutional clients in the two markets.

UOB's Indonesia- and China-based clients will also have direct access to onshore yuan-rupiah foreign exchange rates and liquidity to hedge their trade transactions and investments, the company stated.

UOB China can also offer two-way quotes on the yuan against the rupiah in the interbank FX markets.

What are analysts saying about UOB?

CIMB analysts maintained an 'add' rating and target price of S $ 29 on UOB shares, after reiterating a 'neutral' call on the Singapore banking sector.

They wrote that the impact of the dividend cap removal by the Monetary Authority of Singapore has 'played out'.

MAS has also 'removed the segregation of system statistical data by DBU and ACU, paving the path towards more robust and complete disclosures', the analysts added.

Meanwhile, an earlier-than-expected Fed rate hike could be a key re-rating catalyst for the sector.

Finally, they noted that 'UOB's approach to impairments has been more measured compared to its peers over FY2020'. As a result, they believe that year-on-year earnings growth across FY2021 will likely be relatively modest, albeit stable.

Across the board, the stock has a consensus rating of 'outperform' and target price of S $ 29.61, based on the latest analyst data published by SGX StockFacts.

The target price represents a potential 16.3% upside from its closing price of S $ 25.46 on Wednesday.

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