- We expect UOB's FY25e earnings to decline by ~22%, mainly due to the surge in allowances.
- 3Q25 earnings of S$443mil were below our estimates from higher-than-expected specific provisions and a S$615mil pre-emptive GP. 9M25 PATMI was 56% of our FY25e forecast.
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- UOB has provided FY26e guidance of NIM at 1.75-1.80%, low-single-digit loan growth, high single to double-digit fee income, and credit costs at around 25- 30bps.
The Positive
Expenses decline slightly.
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The Negatives
Allowances surge from pre-emptive GP.
- Total allowances surged by 348% y-o-y, as UOB set aside S$615mil of pre-emptive GP to buffer potential valuation adjustments.
- 3Q25 SPs rose 62% y-o-y, and new NPAs rose to S$838mil (2Q25: S$472mil, 3Q24: S$212mil) from a few accounts in CRE in Greater China and the US. Management mentioned that the CRE Greater China and US LTVs are 44% and 70%, respectively, and that LTV markdowns have already been factored in. As a result, total credit costs spiked 100bps y-o-y to 134bps.
- The NPL ratio inched up slightly to 1.6% (3Q24: 1.5%), and asset quality remained resilient, with 3Q25 NPA coverage at 100%. In comparison, DBS’s 3Q25 NPA coverage is 139%, and OCBC’s 2Q25 coverage ratio is 156%.
- Notably, UOB mentioned that the S$615mil pre-emptive GP was a one-off, and that credit costs are expected to normalise to around 25-30bps in 4Q25 and FY26e, with a possibility of write-backs if valuations improve.
NII and NIM continue to decline.
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