UOB Faces Cautious Outlook as Asset Quality Concerns Deepen; DBS and OCBC Stay Resilient
Investor sentiment toward United Overseas Bank (UOB) has turned more cautious, with analysts flagging asset quality risks following the lender’s steep profit decline in the third quarter of 2025. In contrast, peers DBS Group Holdings and OCBC Bank remain on steadier ground, supported by resilient earnings and strong non-interest income.
UOB’s Q3 Profit Slump and Hefty Provisions
UOB reported a 72 per cent year-on-year fall in net profit to S$443 million for the quarter ended September, missing market expectations. The decline was mainly driven by S$1.4 billion in pre-emptive provisions, including S$615 million in general allowances to cover potential macroeconomic and sectoral risks.
Chief executive Wee Ee Cheong described the move as a “very positive” step akin to “buying insurance,” positioning UOB’s coverage ratio closer to that of its peers. However, analysts viewed the scale of provisions as a surprise. Morningstar’s Lorraine Tan noted that while prudent, the allowances were “a negative surprise” given UOB had not previously indicated such plans.
Citi analyst Tan Yong Hong added that the bank’s specific credit costs rose to 55 basis points from 34 basis points a year ago. Despite a stable non-performing loan (NPL) ratio of 1.6 per cent, new NPLs surged to S$838 million, up sharply from S$212 million in the same period last year. UOB’s NPL coverage ratio, at 100 per cent, continues to trail DBS’s 139 per cent and OCBC’s 160 per cent.
Following the results, UOB shares slipped 4.6 per cent to S$33.25 on Thursday morning, later paring losses to close 2.8 per cent lower.
DBS and OCBC Beat Expectations
Meanwhile, DBS and OCBC both outperformed market forecasts in Q3. DBS’s net profit dipped 2 per cent to S$2.95 billion, while OCBC’s earnings were flat at S$1.98 billion. Both banks cited robust non-interest income and stable margins as key support factors.
DBS’s non-interest income rose 9 per cent to S$2.35 billion, led by record fee income and treasury customer sales. OCBC’s non-interest income jumped 15 per cent to S$1.57 billion, boosted by broad-based gains across fees, trading, and insurance. Its wealth management arm delivered a standout quarter with 34 per cent growth in fee income to S$683 million.
DBS Group Research upgraded OCBC to a “buy” from “hold”, lifting its target price to S$19.80, while Maybank Securities and Citi also raised their calls, citing stronger non-interest income and solid loan growth.
Analysts See Strength in DBS and OCBC
Analysts remain upbeat on DBS and OCBC, highlighting their robust capital positions and consistent earnings visibility. DBS CEO Tan Su Shan said the bank’s allowance reserves remain “more than adequate,” while OCBC CEO Helen Wong described its coverage levels as “quite satisfactory.”
CGS International’s Tay Wee Kuang expects DBS may even write back provisions if economic conditions stabilise. Maybank’s Thilan Wickramasinghe added that OCBC’s high coverage ratio gives it a “significant buffer” against potential credit shocks.
DBS also reinforced investor confidence by reiterating dividend visibility through 2027, with expected yields above 6 per cent in 2026 and 2027. Wickramasinghe said the bank’s scale, strong execution, and safe-haven status offer a clear advantage over its peers.
UOB’s Near-Term Headwinds
In contrast, UOB’s non-interest income fell 17.5 per cent to S$1.13 billion, dragged by higher card reward expenses and weaker trading income. Citi’s Tan projected further underperformance in UOB’s shares, citing reduced 2026 guidance that could pressure earnings per share and dividends.
Still, Morningstar’s Tan suggested the card rewards expense may be a one-off, with fee income growth helping cushion the impact of lower interest rates over time.
At Tuesday’s (Nov 11) close, all three bank stocks ended higher: DBS gained 1.5 per cent to S$55.08, OCBC rose 2 per cent to S$18.55, and UOB edged up 1 per cent to S$34.03.
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