UOB share price on the brink

Lifetime Membership The last time that I covered UOB was in 2022. Obviously, the landscape has evolved much as interest rates start to ease and subsequent US tariffs upended the entire global trade order. For this reason, the script for UOB share price has to change as the counter endured significant turbulence in the wake of geopolitical tensions.

In 2022, the main talking point for UOB share price was the $5 billion acquisition of Citigroup’s Southeast Asia consumer business. I had predicted that the acquisition might push UOB share price to another league, namely above $30, which it did. However, despite the tailwinds from the Citigroup acquisition and the interest rate hikes, UOB share price did not sustain the bullish momentum and dipped to $27 to $28 bandwidth for the large part of 2023.

However, 2024 surprisingly saw UOB share price gaining momentum, possibly due to strong business growth driven by the integration of Citigroup acquisition. From a long-term perspective, the Citigroup acquisition was an interesting deal that could possibly shape the dynamics between the Singapore banking trio. Notably, this deal marked the first overseas acquisition under the helm of CEO Wee Ee Cheong. Wee Cho Yaw, handed the reins to Wee Ee Cheong in 2007. The last overseas acquisition under Wee Cho Yaw was for Indonesia bank, Buana, in 2005. Under the tenure of the senior Wee, UOB made a series of banks that included Bank of Asia, Chung Khiaw Bank, Far Eastern Bank. Radanasin Bank Thailand and Lee Wah Bank and OUB.

Fast forward twenty years later, the merger and acquisition landscape have transformed. DBS and OCBC had both spread their wings through overseas acquisitions. In recent years, DBS had taken up stakes in India and China banks. Over at OCBC, the bank has two banks in Greater China – Wing Hang and Ning Bo. In contrast, UOB has adopted an approach of organic growth through setting up branch offices in Southeast Asia. The Citigroup deal would further entrench UOB as an ASEAN play and provide wind to the sail of UOB share price.

Despite the long-term growth potential of UOB, the upward trajectory for UOB share price is not going to be linear as the world has changed swiftly in the aftermath of Donald Trump’s economic policies. It used to be the case whereby the movement of local bank stocks were solely driven by economic growth and interest rate trends. Nowadays, it’s not so straightforward anymore. The US trade tariffs and UOB’s focus in ASEAN has complicated the analysis of UOB share price. A case in point is that net profit for FY2024 rose 6 per cent to a record $6.0 billion but UOB share price declined 5% year-to-date.

To complicate matters even further, nearly half of UOB loan portfolio comes from Singapore ($164 billion). For this reason, the shift to volume-weighted average borrowing rate, SORA (Singapore Overnight Rate Average) in 2021, should have an impact on UOB’s Net Interest Margin (NIM) moving forward. Unlike SIBOR, a declining SORA will not be immediately reflected on UOB share price as there will be a lagging effect.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.

Drivers for UOB share price

Despite the elevated uncertainties in the near term, I anticipate UOB share price [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.]

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