United Overseas Bank (UOB) reported a paltry net profit of S$443m for 3Q25 (-72% y-o-y and -67% q-o-q). The results were significantly below the consensus estimate of S$1,343m.
Steep fall in net interest income.
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Net interest income declined 8% y-o-y. Exit NIM was 1.82% in Sep 25, which indicates that NIM has started to stabilise.
Incurred higher expenses to harmonise rewards programme.
Fee income grew 9.9% y-o-y to S$892m in 3Q25 driven by wealth management (+19% y-o-y), credit cards (+7% y-o-y) and loans-related fees (+6% y-o-y). AUM expanded 8% y-o-y to S$199b, of which 41% is invested.
Cost-to-income ratio was 45.2% in 3Q25, higher than 43.5% in 1H25.
Asset quality headwinds.
New NPL formation was elevated at S$838m in 3Q25 due to exposures to commercial real estate in Greater China and the US, resulting in sizeable specific provisions of S$479m. It marked down the valuations of collaterals as it seeks to recover the loans by disposing the assets pledged.
UOB recognised one-off pre-emptive general allowances of S$615m to strengthen its general provision coverage from 0.8% to 1.0% and loan loss coverage from 88% to 100%. Total provisions of S$1,361m represents hefty credit costs of 134bp in 3Q25 (1H25: 34bp).
Credit costs are expected to normalise back to 25-30bp in 4Q25.
Sticking to capital management plan.
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Above is an excerpt from a report by UOB Kay Hian Research. Clients of UOB Kay Hian may be the first to access the full PDF report @ https://www.utrade.com.sg/.
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