Citi, OCBC downgrade UOB post-Q2 results; RHB upgrades on valuation
UOB has lowered its fee income guidance, and seen a spike in non-performing assets in the second quarter
Citi Research and OCBC Group Research recently downgraded UOB shares following its second-quarter earnings report. While UOB reported a net profit of S$1.48 billion, beating estimates, the bank lowered its fee income guidance and experienced a surge in non-performing assets (NPAs). Citi Research downgraded UOB to a "sell" rating with a target price of S$38, citing headwinds such as higher card-redemption expenses and lower revenue from investment banking deals. OCBC Group Research upgraded its rating to "hold" and raised its fair-value estimate to S$42.35.
RHB Research, however, upgraded UOB to a "buy" rating from "neutral" and raised its target price to S$46.60. The brokerage noted that the valuation gap between UOB and its peers has become too wide, making it an attractive investment opportunity. Despite the mixed signals from other analysts, RHB believes that UOB's provision buffers are adequate and expects the cost-of-equity gap versus its peers to narrow.
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