Guess which bank is most exposed to Singapore mortgage repricing

Mortgages are 23-24% of gross loans.

According to Macquarie Equities Research, it sees UOB as most exposed of the big three banks to Singapore mortgage repricing. Macquarie believes this will continue to pressure yields into 2014E.

"The banks don’t disclose their Singapore mortgage book, but we estimate UOB’s mortgages are 23-24% of gross loans, higher than our estimates for its peers. We forecast NIM to fall to 1.7% for 2013, down 17bps YoY and to remain near trough levels in 2014-15E," said Macquarie.

Here's more:

UOB is delivering reasonably strong PPoP growth despite the macro pressures. We still see this as a very solid bank with a (slowly) expanding presence in ASEAN. The 3% yield may still attract some investors, and we believe the dividend is sustainable given the balance sheet strength.

The stock is trading on 1.4x P/BV, which we see as close to fair value given the 11-12% ROE outlook. The stock has performed well YTD and exceeded our target price. With limited further upside catalysts and an overtly negative house strategy call on Singapore, we believe a Neutral call is justified.

UOB is our default top pick for investors seeking exposure to the Singapore banks. The operational improvements and consistently strong PPoP and earnings delivered by DBS leave us more impressed, but the risks of getting bogged down in a (full? partial?) acquisition of Danamon tilt our favour to  UOB.

In our view, UOB is a structurally simple bank-centric group with slow organic growth in ASEAN – and this offers better risk/reward, in our view.