UOB maintains profitability despite possible slower loan growth

Management sees demand for hedging, particularly for foreign exchange.

United Overseas Bank (UOB) is expected to remain profitable despite an expected slowdown in economic growth, which in turn will weigh on loan growth and trade loans.

Management expects stress on asset quality to be less intense compared with the COVID-19 pandemic, said UOB Kay Hian analyst Jonathan Koh.

“Management sees growth in demand for hedging, particularly for foreign exchange,” Koh said.

The Singapore-based bank should be able to manage the direct impact from reciprocal tariffs.

Trade loans accounted for 10% of UOB’s total loans, of which 20% to 30% is derived from companies exporting to the US. Corporate export to the US market (10 to 25% of sales) accounted for just 2% of its total loans.

“Thus, management assessed that the direct impact of reciprocal tariffs on the first order will be manageable. Management is more concerned about the second-order impact from a slowdown in business investment and domestic consumption,” Koh said.