Following the announcement of United Overseas Bank Ltd. (UOB) in acquiring four retail assets in Southeast Asia from Citigroup, including the consumer-banking businesses in Thailand, Indonesia, Malaysia, and Vietnam, analysts have been positive on UOB regarding the deal.
DBS Bank, Jefferies, Maybank Kim Eng and RHB Securities reiterated their “BUY” calls on the securities of a Singaporean multinational banking organisation after the report of acquisition without a capital raise. DBS Bank and Jefferies raised their target price from S$29.93 to S$34.20, and from S$33 to S$33.50 per share, respectively. Meanwhile, RBH and Maybank maintained their target price at S$33.50 and S$31.15 per share, respectively.
DBS expects UOB’s return on equity (ROE) will increase 11% from the previous estimate of 10%, seeing the acquisition is fairly priced and will strengthen UOB’s regional strategy. In the meantime, the share price of UOB is expected to re-rate amid economic recovery in a rate hike environment. UOB’s net interest margin is expected to increase in 2022 as well.
RHB wrote in the report, saying that it believes this deal will enhance UOB’s longer-term growth prospects due to the majority of Citi’s loans being classified as unsecured lending in Asean countries except for Malaysia with a very strong unsecured lending business in Indonesia.
Maybank Kim Eng expected the acquisition of Citi’s assets will enable UOB to take advantage of the reopening in Asean while interest rates are poised to rise, which will bring strong opportunities for credit cards and mass wealth products.
