Singapore Stock Market News

United Overseas Bank - Rate cycle beneficiary

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Publish date: Thu, 18 Sep 2014, 03:59 PM
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Potential but delayed benefit in interest rates
UOB is expected to be a beneficiary of the potential turn in interest rates. Historically, its net interest margin (NIM) has also seen a fairly close relationship with the 3 month SIBOR although there appears to be a time lag. This was seen in 2004 to 2006 when the 3MSIBOR rose but was not reflected in UOB's NIM until 2008.

We believe the delayed impact of the interbank interest rate on its NIM can be partly attributed to its higher S$ loan-to-deposit ratio (LDR) which would suggest less liquid assets to benefit initially but only later through the rise in lending rates.
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