United Overseas Bank Ltd (SGX: U11) or UOB in short, is one of the three major banks based out of Singapore.
After reaching an intra-day peak of S$30.37 this year, UOB’s share price has declined by about 15% to S$25.73 (at the time of writing). Despite the fall in share price, there are many reasons why UOB might be a good investment for investors.
Here, let’s look at three reasons why investors might be excited about the bank right now. [Editor’s note: An article sharing a fourth reason has been published. It can be found here.]
One of the first things that investors may be excited about the bank is its recent strong quarterly earnings performance.
Here are some numbers: Total income grew 11% year-on-year to S$2.34 billion; net interest income jumped 14% to S$1.54 billion; and net fees and commission income grew 11% to S$0.5 billion. This resulted in an 11% increase in operating profit to S$1.32 billion. Net profit grew even faster – by 28% year-on-year to S$1.08 billion due to lower loan loss provisions.
In addition, UOB declared an interim dividend per share of S$0.50 per share, up from the S$0.35 interim dividend declared for the first half of 2017.
Historical financial track record
One of the most important factors that investors seek in any investment is the ability of a company to sustain its profitability in the foreseeable future. To assess this, we can look at a company’s track record for a minimum of five years.
As for UOB, the bank has a shown a positive track record over the past five years. During that period, total income grew 33% from S$6.7 billion in 2013 to S$8.9 billion in 2017. Similarly, net profit attributable to shareholders climbed by 13% from S$3.0 billion to S$3.4 billion in that period.
In all, UOB’s performance over the last five years was commendable.
Stable dividend track record
One of the key criteria to look for when investing in a company is its track record of dividend payments. The key here is to look for stable – or even better, increasing- dividend payments over the years.
In the case of UOB, it has done just that. In the last five years, the bank has grown its dividend from S$0.75 per share (including a special dividend of S$0.05 per share) in 2013 to S$1.00 in 2017 (including a special dividend of S$0.20 per share). In other words, UOB’s dividend was up by 33% during the period. In sum, I think that UOB will continue to pay out a good dividend, as long as it can sustain its profitability.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned. Motley Fool has a recommendation for United Overseas Bank Ltd.