It is the 3Q financial reporting season for the banks again. Will UOB share price edge over DBS and OCBC? With only 3 branches in Hong Kong, UOB Group has significantly smaller exposure to the Hong Kong civil unrests as compared to DBS and OCBC. But this is not to say that it is going to be a jolly ride for UOB share price.
For UOB share price, the real battle to be fought is actually the home ground – Singapore. After all, Singapore market is responsible for more than half of its operating profit. With Singapore economy slowing down in 2019, the outlook for UOB seems to be challenging.
By and large, 9MFY2019 results reflected a resilient performance as net interest income and net profit grew 7% and 8% respectively on a year-on-year basis. The report suggests that the strategy by merger wizard, Wee Cho Yaw, to focus growth mainly in Singaporean and South East Asia region had been prudent. As a result, I do not see UOB share price being shattered by the on-going fallout from the Hong Kong protests. The situation is different for DBS and OCBC, which had extensive businesses in Hong Kong through Dao Heng and Wing Hang banks respectively.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in this counter before. Whether UOB share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
UOB share price fights gravity
The latest results revealed certain clues that could possibly shape UOB share price in the coming months. All eyes are on the housing loans as investors will be keen to know the extent of the impact of the 2018 cooling measures and whether UOB share price will be walloped by the new policies.
Looking at the data, it appears to me that the cracks are beginning to show, thereby explaining the erratic form of UOB share price in recent months. Housing loan slowed from $68.4 billion in December 2018 to $68 billion in September 2019. Luckily, the drop in housing loan had been offset by the huge increase in building and construction loans, which surged from $63 billion to $68 billion in the corresponding period.
Net interest income for 9MFY2019 was $4.9 billion while net fee income amounted to $1.5 billion. Going forward, the net interest income will likely to come under pressure with USA cutting interest rates. Net interest margin (NIM) was 1.77%, a decrease from 1.81% seen in 3QFY2018.
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