UNITED OVERSEAS BANK (UOB)

UNITED OVERSEAS BANK (UOB) | BUY

MAY 3 CLOSE: $29.58

TARGET PRICE: $33.20

DBS, May 3

UOB continues to be optimistic about FY18's outlook and has guided for high single-digit loan growth (we have assumed 8 per cent), net interest margin to continue to track higher with visibly higher rates ahead, and credit costs guided at 20-25 basis points, possibly at the lower end.

UOB's full year dividend of $1.00 per share is here to stay. Possible upside to higher dividends would not be discounted.

There might be special dividends along the way. Although scrip dividends will prevail, the shares would be issued without a discount.

UOB hinted at a likelihood of attaining 12 per cent return on equity (1Q17: 11.0 per cent) over these two years on the back of sustained net interest margin uplift (another 1-2 basis points each quarter ahead), further improvements in cost management and higher dividends.

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