Published March 3, 2009

UOB shares dive 7.4% after reporting poor earnings

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SHARES of United Overseas Bank, Singapore's second-largest lender, fell 7.4 per cent yesterday after brokers cut their price targets for the bank following last week's poor earnings result.

Drawing down expectations: Analysts slashed UOB's target price after the bank reported a larger-than- expected 34 per cent fall in Q4 profit last week

Credit Suisse downgraded its rating on the bank to 'neutral' from its previous 'outperform' and cut its target price to $12.00 from $14.75. 'The analyst briefing gave us the impression that UOB is taking a more bearish view among the three (Singapore) banks, recognising NPLs (non-performing loans) faster, providing conservatively and acting to avoid a dilution,' the analysts said.

JP Morgan cut its price target to $13.00 from $15.00, largely citing UOB's lower book value due to mark-to-market losses on its portfolio of securities. The broker said that it prefers DBS, South-east Asia's biggest bank, over UOB.

JP Morgan maintained its 'neutral' rating for UOB yesterday and forecast a 42 per cent year-on-year decline in the bank's net profit this year.

UOB's fourth quarter net profit fell a larger-than-expected 34 per cent due to higher writedowns for bad debt and lower fees from capital markets.

Deutsche Bank also slashed UOB's target price, to $11.30 from $12.40, due to the bank's lower return-on-equity.

UOB shares ended at $9.25, while DBS shares dropped 5.5 per cent to $7.41 and Overseas-Chinese Banking Corp slipped 7.1 per cent to $4.16.

The benchmark Straits Times Index fell 3.9 per cent to 1,533.40. -- Reuters