Lifetime Membership As the saying goes, a rising tide lifts many boats. The much-anticipated interest rate hikes in 2022 are expected to set fire on local bank stocks, including UOB share price. Despite the buoyant outlook, UOB share price has not reached the record level of $30 last seen in May 2018. This is unlike its peer, DBS share price, which has raced past the $30 mark in July 2021. If UOB share price had matched the form of DBS share price, UOB would have become Singapore’s second largest bank (in terms of market capitalization).
The last time that I covered UOB share price was on 15 May 2020. That was one of the darkest chapters for UOB share price as the global stock markets were reeling from the onset of the pandemic. In Singapore, there were plenty of uncertainties due to the implementation of Circuit Breaker measures. Subsequently, UOB share price staged a U-shaped recovery as the unprecedented three Budget stimulus packages worked their magic.
The announcement of COVID-19 vaccine in late 2020 had sparked off a rally for UOB share price. Investors were given hope that the vaccine will spell the end of the terrible pandemic. As we entered 2021, we have not seen the light at end of tunnel due to the emergence of variants, the latest being Omicron. Throughout 2020, UOB share price had been affected by impacts inflicted by Delta variant. But of noteworthy is that UOB share price has increased 17.20% year-to-date.
The impending interest rate hike is expected to turbocharge UOB share price in FY2022. To put things into perspective, the narrative for the past two years for local banks is all about containing non-performing loans and impairments. Due to the gravity of the crisis, headline growth for UOB has been below pre-pandemic. For example, the 9MFY2021 total income amounted to $7.3 billion vis-à-vis $7.6 billion recorded in 9MFY2019. This is well within expectation as net interest income has been hammered by low interest rates.
Moving forward, the tailwind from interest hikes could set UOB share price on fire as net interest income should increase. Question now is: how high will UOB share price go? Being the only family-owned and family-managed bank in Singapore, UOB is controlled by the Wee family. During the financial pandemic of Great Financial Crisis 2009, veteran banker Wee Cho Yaw was still at the helm. Now, his eldest son, Wee Ee Cheong is holding the fort. Will UOB share price be able to fight against the gravitational pull of the pandemic?
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 UOB share 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 on form
DBS share price is in a league of its own and its difficult for the other two local bank stocks to catch up. Like OCBC, UOB share price struggled to keep pace with the surging momentum of DBS stock price. Probably because of this, the management has resorted to aggressive shares buybacks in recent months (similar to OCBC).
As of 3 December, a total of 4.5 million of shares have been repurchased from the market. Interestingly, the shares buybacks did have a strong correlation to the form of UOB share price. This is unlike the case of OCBC share price, which failed to surge despite countless shares buybacks.
Take for example, the shares buybacks resumed in the last days of August 2021. Since then, UOB share price roared from $25.60 to smash a high of $28 in early November. Thereafter, news of Omicron knocked the wind off UOB share price. I suspect the key reason for the stronger effect of the share buybacks for UOB share price should be [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]Lifetime Membership
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