Brokers’ take: RHB expects UOB’s valuation to provide downside support; raises target to S$32

RHB on Tuesday (Jul 23) raised its target price on UOB to S$32 from S$30.10 after rolling forward its valuation base year to FY2025. It has a “neutral” recommendation on the counter.

Shares of UOB were trading 0.4 per cent or S$0.13 higher at S$32.70 as at 1.27 pm.

The research team said the lender’s valuations would provide downside support.

After meeting the bank’s management, it believes net profit could ease quarter on quarter in Q2 2024 if the bank’s trading and investment income normalises from the high record in Q1.

It views the roll-off in Citi integration costs in the second half of 2024 as positive for earnings. Furthermore, efforts to build up the wholesale platform look to be “bearing fruit”.

Two years ago, UOB implemented its digital platform for the wholesale business for the rest of the region. RHB said this should have a “positive impact” on wholesale Casa (current and savings account) momentum.

“However, investors’ focus will be on dividend yields and dividend per share growth in an interest rate downcycle, and UOB’s preference to retain capital for growth means yields and DPS (dividend per share) growth may lag peers,” RHB noted.