UOB share price: 4 key considerations ahead of Q1 earnings

When is UOB’s Q1 2020 financial results out?

Singapore bank United Overseas Bank (UOB) is set to announce its first quarter earnings for the three months ended 31 March 2020, on Wednesday 06 May 2020.

UOB has a network of more than 500 offices in 19 countries and territories in Asia Pacific, Europe and North America. The bank has an Aa1 rating by Moody’s Investors Service and AA- rating by both S&P Global Ratings and Fitch Ratings.

Here are four things that investors should know ahead of the upcoming financial report.

1. UOB CEO: ‘downward pressure in customer margin’

UOB Deputy Chairman and Chief Executive Officer Wee Ee Cheong had provided the following guidance for the 2020 financial year in the bank’s most recent quarterly report:

‘Many signs point to more challenging times ahead including the unfolding impact of the COVID-19 epidemic,’ adding during the group’s Q4 FY2019 earnings call that he expects there to be ‘downward pressure in customer margin’ alongside ‘slight uptick in credit costs’, given that Mainland China accounted for S$30 billion or 7% of the group’s total assets as of 31 December 2019.

Wee said that the bank will continue to invest in its capabilities throughout this crisis, including digital, and ‘seize the opportunities arising from the shifting economic environment’.

‘It will enable us to emerge stronger from these trying times and to scale up our franchise across the region,’ he said.

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2. UOB’ earnings met analyst estimates in all four quarters of 2019

The lender’s net profit for the full 2019 fiscal year rose 8% to S$4.34 billion. Total income for the full year also grew 10% to cross the S$10 billion mark, led by healthy growth in client franchise as well as an improvement in trading and investment income. Return on equity increased to 11.6%.

Earnings for all four quarters of 2019 were also on par with Refinitiv analyst estimates.

For the upcoming Q1 FY2020 report, Refinitiv analysts have given a S$793.3 million consensus prediction for net profit and an earnings per share estimate of S$0.483. These are 29.7% and 21.5% lower respectively than estimates for the same quarter one year prior.

In terms of share price, UOB shares are down 25.1% year-to-date, with most of the drop having occurred between February and March 2020 during the peak of the coronavirus outbreak.

The average share price target for UOB based on five analyst estimates is S$21.37 per share. Of these, four have rated the UOB stock a ‘hold’ and one rated it ‘accumulate’.

As at 09:45 SGT on 05 May 2020, UOB shares are trading at S$19.98 per share, based on IG trading data.

3. UOB not planning any layoffs for now

Wee also said in an April 2020 statement that the company, which employs over 24,000 people, is not planning any layoffs this year.

‘For our people, we are committed to seeing them through to better times’, said Wee, adding that the bank had supplied every employee with face masks as well as provided them with relevant online training programmes during this pandemic.

4. UOB offers collateral-free loans to SMEs

On 21 April 2020, UOB announced that it would be offering pre-approved loans of up to S$200,000 to help ease the short-term liquidity woes of its small business customers impacted by the COVID-19 pandemic.

With small businesses making up two in three of all small- and medium-sized enterprises in Singapore, the lender said that the collateral-free loans will help many of these companies, especially those from hard-hit sectors such as retail and food and beverage, gain access to much-needed funds quickly.

The bank said it has also been active in helping customers understand and apply for the government-assisted financing schemes administered by Enterprise Singapore.

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