UOB Earnings: Higher NPLs in Hong Kong Offset by Asset Quality Improvement Elsewhere

We maintain our fair value estimate of SGD 38 per share for United Overseas Bank, 18% above the current share price and around 1.4 times the 2024 book value. The second-quarter annualized return on equity came in at 12.0%, which is close to UOB’s recent average and slightly above our estimate of its cost of equity. Annualized credit costs were slightly elevated at 29 basis points of loans, but when combined with the 21 basis points recorded in the first quarter, they remain in line with our full-year forecast of 25 basis points. Some of the rise in credit costs in the quarter was related to UOB’s integration of the former Citi business in Thailand, as loans extended by the former Citi became subject to UOB’s credit classifications, and are, therefore, one-off or may be later reversed. We maintain our existing forecasts.