To The Moon

🌟🌟🌟UOB $UOB(U11.SI)$  has just celebrated its 90th year anniversary and is Singapore's 3rd largest bank after DBS and OCBC.  Its share price has recently dropped to SGD 34.64 as Analysts downgraded UOB from Buy to Hold.  This is due to concerns of weaker loan growth and higher credit costs as the US tariffs threaten a global trade war.

In order to determine whether UOB is a Buy, let's check out its FY2024 earnings report issued on February 19 2025.

In FY2024, UOB's net profit grew 6% from the previous year to a record SGD 6.0 billion.  This is due to a strong net fee income, trading and investment income.  Net interest income remained steady at SGD 9.7 billion as a healthy loan growth of 5% was moderated by the effects of interest rate movements on its net interest margin (NIM).  Net fee income grrew 7% to SGD 2.4 billion, led by double digit growth in wealth fees, stronger credit card fees and higher loan related fees.  Asset quality remained stable with non performing loan (NPL) ratio at 1.5%.

Group Wholesale Banking continued to see strong momentum in its overall performance.  Trade loans increased 20% from the previous year.  Transaction banking business demonstrated consistent growth, and now accounts for more than half of the Group Wholesale Banking income.  Cross Border income also grew, and now makes up more than a quarter of the Group Wholesale Banking income.

Group Retail also performed well in FY24.   Credit card fees remained strong, growing 18% year on year, backed by continued consumer spending and an enlarged regional franchise.

Wealth management income is a star performer as it rose 30%, supported by improved investor sentiments.  UOB continues to see strong net new money inflows, bringing high net worth assets under management to SGD 190 billion, a 8% year on year growth.  UOB added more than 850,000 new to banking customers in FY24, of which half were acquired digitally.  As at the end of 2024, UOB's retail customer base has expanded to nearly 8.4 million.

The Board recommends the payment of a final dividend of 92 cents per share.  Together with the interim dividend of 88 cents per share, the total dividend for FY 24 will be SGD 1.80 per share, representing a payout ratio of around 50%.  The current dividend yield is 5.2%.

Compared to the other banks DBS and OCBC, UOB's strengths lie in its relationship banking, digital platforms and integration across ASEAN markets.  UOB acquired Citibank's consumer banking business in 4 ASEAN markets - Indonesia, Malaysia, Thailand and Vietnam in 2022 at a cost of SGD 4.915 billion. 

This acquisition has allowed UOB to scale up its business in these 4 regional areas and accelerate its growth targets by 5 years. 

Financial Fundamentals and Valuation 

At the last closing price of SGD 34.64, UOB has a price to earnings (PE) ratio of 9.79 and an Earnings per share (EPS) of about SGD 3.54.  With a forward dividend yield of 5.2% based on SGD 1.80 dividend, UOB offers an attractive valuation compared to its peers as well as a great income generating asset for dividend seeking investors. 

Analysts Rating and Price Target 

Analysts sentiment on UOB appears to be mixed yet cautiously optimistic.  Recent research reports highlight that its price targets range widely from SGD 32.02 on the low side to a high of SGD 41.60 on the upside.  The median target price is about SGD 39.80, implying an upside potential of 15.8%.

Investment Pros and Cons 

Pros :

Steady Income and Strong Fundamentals - UOB's consistent dividends and low PE ratio are attractive for income oriented investors iin a low yield environment. 

Defensive Quality - As a major player in a well regulated market like Singapore, UOB benefits from a disciplined risk management and diversified operations across retail and corporate sectors. 

Upside Potential - The current spread between UOB's trading price and consensus price targets indicates a good potential for capital gains provided external risks remain contained. 

Cons/Risks

Macro Economic Sensitivity -  Like all its competing banks DBS and OCBC, UOB is impacted by regional and global economic cycles. Concerns such as slowing economic growth or changes in interest rates could weigh on its performance. 

Divergent Analysts Views -  With a balance between Buy and Hold recommendations, investors need to be comfortable with some of the uncertainties and external headwinds mentioned by the more cautious analysts. 

I have invested in UOB since 2022 and despite the macro economic uncertainties, I have been rewarded with great dividends as well as capital growth. 

As the late great Charlie Munger likes to say, "The Big Money is not in the Buying and Selling but in the Waiting." 

Slow and Steady wins the race. 

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