UOB shares steady despite missing profit estimates

UOB shares rallied steadily throughout Thursday, even after the group’s net profit fell below analyst estimates.

UOB share price: What’s the latest?

Singapore’s third largest money lender United Overseas Bank (UOB) (SGX: U11) saw its share price rise 1.55% on Thursday 06 August 2020, despite posting lower profits for the second quarter of fiscal 2020.

As at 15:30 SGT on Thursday, UOB shares are trading at S$19.78 each on the IG platform – an intraday high. Share price remains lifted as of press time.

IG’s market analysis shows that ‘buys’ form 67% of all trades on the UOB counter in the last one hour, while ‘sells’ made up 57% of all trades across the day.

Additionally, 83% of client accounts also currently hold ‘buy’ (long) positions on the stock, indicating an expectation for UOB’s share price to rise in the immediate term.

As of 30 July 2020, the stock has a 12-month consensus share price target of S$20.66 per share from six analysts, alongside an average rating of ‘hold’ – based on a Refinitiv poll of 18 brokers.

UOB’s net profit falls 40% in Q2 of 2020

The bank announced its earnings for the three months ended 30 June 2020 before the market opened on Thursday.

It reported a net profit of S$703 million for Q2 2020, 40% lower than that of Q2 2019. It attributed this decline to lower margins and higher credits costs.

This figure also missed Refinitiv survey estimates of S$781 million for the quarter.

Breaking down by income segment, net interest income decreased 12% year-on-year to S$1.46 billion in Q2, as margin compression offset the loan growth of 3%.

Net fee and commission income was 15% lower than Q2 2019 at S$445 million, as movement restrictions across the region weighed on customer activities. Trading and investment income declined to S$294 million from S$311 million a year ago, largely due to lower net trading income.

Meanwhile, total operating expenses decreased 8% to S$1.04 billion in line with lower income, resulting in a cost-to-income ratio of 46% for the quarter.

Finally, asset quality marked by non-performing loan (NPL) ratio stood at 1.6% for 2Q20, unchanged from last quarter as NPL formation was low this quarter.

Are you looking to buy long or short sell UOB shares without trading the underlying asset? Start today by opening a live or demo IG account.

UOB lowers Q2 dividends by 30% to S$0.39 per share

Consequently, the group proposed an interim one-time tax-exempt dividend of S$0.39 per share, down 29% from the amount of S$0.55 paid a year prior. A scrip dividend payment option will be provided this year.

The lower dividend sum is in line with the Monetary Authority of Singapore’s call last week for banks to cap the total dividends per share (DPS) at 60% of the prior year’s DPS, as well as to make available the option to receive dividends in scrip.

UOB foresees upside to net interest margin in upcoming quarters

Looking ahead, the group says its it will continue its approach of ‘balancing growth with stability’, so as to ‘drive shareholder value and dividends in a sustainable manner’.

In terms of specific outlook areas, UOB says it will focus on the long-term growth potential of the Group Wholesale Banking and Group Retail segments.

It also foresees that there will be some upside to net interest margin in the second half of 2020, with moderate rebound in fees also expected in the next two quarters as economies gradually reopen.

In terms of credit outlook, the group says credit costs are likely to remain around Q2 2020 levels, ‘with more preemptive allowances to cushion anticipated asset quality weaknesses’.

Wee Ee Cheong, UOB’s Deputy Chairman and Chief Executive Officer, said: ‘Over the last few months, the Covid-19 pandemic has upended the way we live and work, with businesses and individuals having to deal with unprecedented challenges. With the global economy moving into the deepest recession in recent history, our financial performance for the first half of the year has not been immune to the impact.

‘However, UOB entered this crisis from a position of strength, having built our resilience through weathering past storms, be they economic, man-made or natural disasters. We maintain prudence and discipline in our risk management and will continue to strengthen our provision coverage.’

How to trade UOB with IG

Are you feeling bullish or bearish on UOB shares? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <United Overseas Bank Ltd> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

React to global volatility

Market volatility continues as coronavirus concerns amplify. Trade with IG and take advantage of:

  • Tight spreads – from just 1 point on major indices, and 2.8 on US crude
  • Guaranteed stops – they’re free to use, and only incur a fee when triggered
  • Round-the-clock assistance – our highly skilled team are available when you need support

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

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

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices 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.