CGS International
May 7, 2025

United Overseas Bank Posts Resilient Q1 2025: In-Depth Analysis, Regional Bank Comparisons, and Key Sector Insights

Overview: UOB’s Stable Q1 2025 Amid Market Uncertainty

United Overseas Bank (UOB) demonstrated resilience in the first quarter of 2025, reporting a net profit of S\$1.49 billion—a slight year-on-year increase of 0.3% but down 2.1% quarter-on-quarter. This result, while just below consensus forecasts, highlights the bank’s robust operational performance in the face of global economic uncertainty and regulatory changes.
Q1 2025 net profit: S$1.49bn (+0.3% yoy, -2.1% qoq)
Net interest income (NII): S$2.41bn (+2.0% yoy, -1.7% qoq)
Net fee and commission income: +19.7% yoy, +22.4% qoq
Total allowances for credit losses: S$290m (35bps in credit costs)
Higher effective tax rate due to implementation of BEPS 2.0 minimum tax rate

Operational Performance: Key Drivers and Financial Metrics

UOB’s operational strength was evident across several core metrics:

• Net Interest Income (NII): S\$2.41bn, supported by 5.7% year-on-year loan growth despite a slight 2bp decline in net interest margin (NIM) to 2.00%.
• Non-Interest Income: S\$1.25bn, including robust fee and commission income growth (+19.7% yoy) and expansion in wealth management and loan-related fees.
• Credit Provisions: Total allowances stood at S\$290m or 35bps, with specific provisions at their lowest since Q3 2022, indicating no systemic risk buildup.
• Expenses: Operating expenses increased 5.7% yoy to S\$1.56bn, with a cost-to-income ratio of 42.6%.
• Tax Impact: The minimum tax rate under BEPS 2.0 took effect in 2025, resulting in a higher effective tax rate and a moderation in Q1 net profit.

Table: Key Quarterly Financials (Q1 2025)

Guidance and Outlook: Navigating Macroeconomic Uncertainty

UOB has paused its FY25 guidance amid ongoing macroeconomic uncertainty, notably following US Liberation Day in April. However, management does not anticipate any drastic downward revisions as the bank’s Q1 performance achieved or exceeded key targets:
Total income growth: +3.8% yoy (Guidance: positive growth)
Double-digit fee income growth: +19.4% yoy
Loan growth: +5.7% yoy (mid-single-digit guidance)
Credit costs: 35bps (in line with 25-30bps guidance)
Trade flows within China-ASEAN and the intra-ASEAN bloc remain healthy, supporting the loan book, which is heavily concentrated (approx. 85%) in ASEAN and Greater China.

Capital Management and Shareholder Returns

UOB maintains its S\$3 billion capital distribution plan, including:
Declared special dividend per share (DPS) of S$0.50 for FY25 (approx. S$835m)
S$2 billion share buyback program across FY25-FY27

Valuation, Price Performance, and Shareholder Structure

– Current price: S\$34.98 – Target price: S\$38.80 (unchanged; 10.9% upside) – Market cap: S\$58,449m (US\$45,365m) – Free float: 85.6% – Major shareholders: Wee Investments (7.7%), Wah Hin & Co (5.0%), Vanguard (2.0%)

Key Financial Forecasts (2025-2027)

Peer Comparison: Singapore, Indonesia, Malaysia, and Thailand Banks

Singapore Banks

• Singapore average P/BV: 1.41x; ROE: 13.9%; P/E: 8.2x; Dividend Yield: 6.9%

Indonesia Banks

• Indonesia average P/BV: 2.23x; ROE: 18.8%; P/E: 7.1x; Dividend Yield: 5.6%

Malaysia Banks

• Affin Bank: P/BV 0.53x, ROE 4.4%, P/E 8.1x, Dividend Yield 3.3%
• Alliance Bank Malaysia: P/BV 0.85x, ROE 10.2%, P/E 5.6x, Dividend Yield 5.8%
• AMMB Holdings: P/BV 0.79x, ROE 9.7%, P/E 6.1x, Dividend Yield 4.8%
• Bank Islam Malaysia: P/BV 0.68x, ROE 7.9%, P/E 5.1x, Dividend Yield 6.8%
• Hong Leong Bank: P/BV 1.05x, ROE 11.3%, P/E 11.3x, Dividend Yield 4.2%
• Malayan Banking: P/BV 1.11x, ROE 10.7%, P/E 7.8x, Dividend Yield 6.4%
• Public Bank: P/BV 1.38x, ROE 12.3%, P/E 8.7x, Dividend Yield 5.1%
• RHB Bank: P/BV 0.85x, ROE 9.6%, P/E 6.2x, Dividend Yield 6.6%
• Malaysia average P/BV: 1.06x; ROE: 10.6%; P/E: 7.9x; Dividend Yield: 5.6%

Thailand Banks

• Bangkok Bank: P/BV 0.46x, ROE 7.4%, P/E 3.1x, Dividend Yield 6.3%
• Kasikornbank: P/BV 0.66x, ROE 7.4%, P/E 3.8x, Dividend Yield 5.6%
• Kiatnakin Phatra Bank: P/BV 0.59x, ROE 7.4%, P/E 3.6x, Dividend Yield 6.2%
• Krung Thai Bank: P/BV 0.66x, ROE 8.0%, P/E 3.7x, Dividend Yield 5.8%
• Muangthai Capital: P/BV 2.04x, ROE 17.2%, P/E 6.5x, Dividend Yield 0.8%
• SCB X: P/BV 0.81x, ROE 8.3%, P/E 4.2x, Dividend Yield 8.2%
• Srisawad Corporation: P/BV 1.22x, ROE 13.2%, P/E 5.2x, Dividend Yield 3.6%
• Tisco Financial Group: P/BV 1.78x, ROE 14.7%, P/E 7.8x, Dividend Yield 7.0%
• TMBThanachart Bank: P/BV 0.74x, ROE 8.4%, P/E 5.1x, Dividend Yield 7.4%
• Thailand average P/BV: 0.70x; ROE: 8.1%; P/E: 4.0x; Dividend Yield: 6.3%

UOB’s Strategic Outlook: Opportunities and Risks

Opportunities

• Loan growth exceeding 5% annual expectation
• Accelerated share buybacks and new capital return initiatives

Risks

• Potential drastic US Federal Reserve rate cuts, pressuring NIMs
• Escalating trade tensions or slowing global growth, which could dampen loan demand and require higher provisions

Long-Term Financial Projections

Conclusion: UOB Well-Positioned for Resilient Growth

UOB’s first quarter 2025 results underscore its operational resilience and prudent risk management amid economic volatility and new tax regulations. With robust fee growth, stable loan expansion, and shareholder-friendly capital actions, UOB is well-placed to navigate market uncertainties.
The bank’s strong fundamentals, attractive dividend yield, and committed capital return strategy should continue to appeal to investors seeking stable returns in the banking sector. While near-term headwinds persist, UOB’s diversified regional exposure and healthy financial metrics set a solid foundation for continued growth through 2025 and beyond.