• UOB's 4Q20 net profit of S$688m (+3% q-o-q) was in line with our expectation but 6% below consensus. NIM rose 4bp q-o-q to 1.57%, above peers’ (-4bp to +2bp).
• Asset quality under control. Credit cost of 55bp in 4Q20 (FY20: 57bp) was in line with expectations. Moratorium loans: 6% in Jan 21 vs 10% in Oct 20.
• Reiterate ADD. UOB declared final dividend of S$0.39 per share declared (with scrip), FY20 total dividend at S$0.78 per share.

UOB's 4Q20 Results in Line

• UOB (SGX:U11)’s 4Q20 net profit of S$688m (+3% q-o-q, -32% y-o-y) was in line with our expectations and 6% above consensus. FY20 formed 100%/101% of our/consensus forecasts.
• UOB declared final dividend of S$0.39 per share for 4Q20, bringing UOB's FY20 total dividend per share to S$0.78 (as bound by MAS’s dividend cap at 60% of FY19’s payout). This represents a ~45% dividend payout ratio. A scrip dividend scheme will be applied to 4Q20 dividends.

Stronger-than-peers NIM, CASA Management

• NIM rose 4bp q-o-q to 1.57% in 4Q20 (3Q20: 1.48%), above the street’s expected ~2- 3bp expansion. Consequently, NII rose 3% q-o-q. The NIM improvement primarily came on the back of lower funding costs and a larger 53.5% CASA proportion (3Q20: 51%, 4Q19: 45.4%). UOB's full-year NIM came in at 1.57% (-21bp y-o-y from FY19’s 1.78%).
• Relative to peers that still saw declines in total income, UOB posted flattish q-o-q total income of S$2.2bn (-8% y-o-y). The rise in NII (+3% q-o-q) and fee income was offset by weaker treasury income.
• Fee income showed an uptrend (+2% q-o-q, +10% y-o-y), thanks to better credit card income (+15% q-o-q, -20% y-o-y), which was offset by weaker loan-related fees (-13% q-o-q, +19% y-o-y). Wealth management fees held steady at S$188m (flattish q-o-q, +16% y-o-y).
• Treasury income declined (-28% q-o-q, -32% y-o-y) due to lower trading and bond sales amid relatively low rates.

Loan Moratorium

• UOB's loans under moratorium reduced to ~6% in Jan 21 (from ~10% in Oct 20).
• UOB’s portfolio under relief measures is ~90% collaterised.

CEO Guidance

• High single-digit loan growth in FY21F (FY20: +4.8%), double-digit growth in wealth fees (FY20: +11% y-o-y), stable CTI (FY20: 45.6%), lower credit costs (FY20: 56bp).
• We project neutral to positive movement of UOB Share Price on the back of this set of results. Summary of key statistics available in report attached below.

Reiterate ADD

• We reiterate our ADD call for UOB and GGM-based target price of S$27.72.
• A downside risk is significant NPL accretion following the expiry of loan moratoriums.

Source: CGS-CIMB Research - 25 Feb 2021