UOB hits 13-month high after Q1 profit beats estimates

United Overseas Bank (UOB) shares rallied strongly on Friday, after posting better-than-expected net profit in the first quarter of 2021.

  • United Overseas Bank Ltd (SGX: U11) share price jumps to US$26.72 per share
  • The money lender reported an 18% year-on-year improvement in first quarter net profit a day earlier
  • Its CEO Wee Ee Cheong expects the recovery momentum to continue
  • IG analyst Yeap Jun Rong, however, cautions that Covid-19 cases could pose a key risk to the pace of economic recovery ahead
  • Buy and sell UOB shares with an IG account

UOB share price: What’s the latest?

UOB shares closed 2.1% higher at S$26.58 on Friday (07 May 2021), a day after it released its financial results for the first quarter of 2021.

The money lender registered the highest total value of securities traded on the day on the Singapore Exchange (SGX), with S$166.31 million of transactions.

The stock, which is up some 17% year to date, hit a 13-month peak of S$26.72 earlier in the day.

UOB posts ‘strong’ first quarter

UOB Group said on Thursday that it ‘achieved a strong start’ to the year, with 1Q 2021 net profit rising 18% year-on-year and 46% quarter-on-quarter to S$1 billion. This beat analyst expectations of S$926 million, based on a Bloomberg poll.

‘The solid rebound came on the back of broad-based growth across the group’s diversified franchise,’ the bank said in a SGX filing.

Total income increased 3% year-on-year and 11% quarter-on-quarter to around pre-Covid-19 levels at S$2.49 billion.

Fee income reached a new high, led by wealth management fees from investments and bancassurance. ‘This was in addition to healthy loans and investment banking activities such as major advisory trades, coupled with stronger treasury income’, UOB added.

Meanwhile, its portfolio and asset quality remain ‘resilient and well-secured’, with credit costs in 1Q 2021 easing to 29 basis points. Balance sheet ‘remained robust with ample liquidity and strong Common Equity Tier 1 (CET1) ratio at 14.3%’.

What is UOB’s outlook for the rest of 2021?

Mr Wee Ee Cheong, Deputy Chairman and CEO, UOB, said the group’s revenue drivers accelerated in the first quarter, as its core businesses ‘are growing well’ alongside ‘quality growth’ from record fee income of S$638 million.

Looking ahead, he expects the momentum to continue as economic and business activity picks up and market sentiment improves across the region, starting with Singapore and Greater China.

The group is ‘right on course for strong, sustainable growth’, thanks to high single-digit growth in loans, stable cost-income ratio, stable margins and more, Mr Wee noted in his earnings presentation.

The company is also experiencing robust credit demand from its largest corporate and institutional clients across its key markets, he added.

IG market strategist Yeap Jun Rong said that while UOB’s latest results show continued growth, Covid-19 cases could pose a key risk to the pace of economic recovery ahead.

Mr Wee also said during a media briefing that UOB is eyeing Citigroup’s assets in the markets where it will exit.

‘We are always open to acquisition opportunities... as long as it's a strategic fit and at a right price, and it has to make sense for the long term,’ he said.

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