RHB has upgraded its call for UOB to “buy” from “neutral”, while raising its price target for the lender to S$40.20 from S$35.60 previously.
The new price target is 10.3 per cent above UOB’s latest closing price of S$36.43 and 12.9 per cent above its previous target price on Nov 11.
On Wednesday (Nov 20), the research house said its new call and price target comes amid a positive 2025 outlook. The lender largely lagged peers in the past 23 months, but RHB thinks this trend will reverse and that UOB will outperform the sector.
Analysts from RHB’s Singapore Research pointed out that UOB’s Asean-centric portfolio may provide investors a “hideout” from the market volatility likely to follow from 2024’s US presidential election outcome.
“UOB may offer investors a defensive shelter to ride through the volatility ahead,” they said.
As Asean economies have “relatively low” trade exposure to the US, RHB Global Economics and Market Strategy expects they will post “stable-to-stronger” economic growth for 2025 on sustained strength in trade and manufacturing, as well as tourism.
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However, it warned that these economies might be indirectly affected by market volatility through exposure to China.
RHB’s Singapore Research analysts also believe that UOB will enjoy benefits as its multi-year investments in platforms and its Citi acquisition “are gaining traction and bearing fruit”.
“We believe some of these benefits were evident in the recent Q3 2024 results – its loan and current and savings account growth of 5 per cent year on year, and 17 per cent year on year outpaced that of peers,” said the analysts.
This leads to a positive outlook for 2025, as the analysts forecast that the bank’s earnings growth will outperform that of the “flat earnings” of its peers in the sector.
“We expect its reported profit after tax and minority interests (Patmi) for FY2025 to grow by 6 per cent year on year, superior to the flat earnings for the sector. On a core basis, we still forecast FY2025 Patmi to rise by 3 per cent,” they said.
“The rise in Patmi and higher dividend payouts assumed supports our 9 per cent dividends per share growth for FY2025F,” they added.
With UOB’s improved capital position, shareholders can potentially expect “more aggressive” capital returns in the form of higher dividends or share buybacks.
Shares of UOB were trading down 0.1 per cent or S$0.05 at S$36.43 as at 11.20 am on Wednesday.
