- UOB (SGX:U11)'s 9M25 core-earnings were significantly behind MIBG/Street expectations driven by a large, pre-emptive general provision to address stress in commercial real estate exposure. It is too early to conclude whether this is a sufficient ‘kitchen sink’ to mitigate overall risks.
- - Read this at SGinvestors.io -
Negative provision surprise. Is it kitchen sinking?
- UOB’s S$615m pre-emptive general provisions boosted overall credit costs to 134bps in 3Q25. This is higher than the 110bps peak during GFC. Management claims this is in response to risks in commercial real estate (CRE) in Greater China and US. This segment is expected to make a ‘U-shaped’ recovery and these provisions should help the Group ride the cycle. We note RoW NPLs have increased +25% q-o-q, while Greater China has seen a +13% increase.
- - Read this at SGinvestors.io -
- Uncertainty around the recovery trajectory of CRE and the potential for further NPL classifications means calling the current provisions ‘kitchen sinking’ seems premature, in our view.
- We cautiously raise FY25-26E provisions by 14% - 118%, pegging credit costs to the higher end of Management guidance.
NoII support for PPOP to expand amidst falling NIMs.
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