UOB Kay Hian covering the report. Thursday, 08 May 2025
UOB Navigates Headwinds: A Deep Dive into 1Q25 Performance and Outlook
In the first quarter of 2025, United Overseas Bank (UOB SP) reported a net profit of S\$1,490m, a performance that remained flat year-on-year but saw a slight sequential dip of 2%. This result came in marginally below the consensus estimate of S\$1,540m. The bank’s performance was supported by growth in net interest income and robust fee income expansion, although management has flagged heightened uncertainties by suspending its full-year guidance.
Company Overview and Stock Data
Founded in 1935, UOB is a well-established financial institution with a significant regional footprint across Singapore, Malaysia, Indonesia, Thailand, Vietnam, Hong Kong, and Mainland China. In its home market of Singapore, UOB holds leading positions in credit and debit cards, as well as loans to Small and Medium-sized Enterprises (SMEs).
Key stock data points as of the report date:
- GICS Sector: Financials
- Bloomberg Ticker: UOB SP
- Share Price: S\$34.49
- Target Price: n.a.
- Upside: n.a.
- Shares Issued (m): 1,670.9
- Market Cap (S\$m): 57,630.0
- Market Cap (US\$m): 44,622.5
- 3-mth Avg Daily T’over (US\$m): 101.4
- 52-week High/Low: S\$39.20/S\$29.00
Price Performance (%):
- 1mth: (2.7)
- 3mth: (7.5)
- 6mth: 7.7
- 1yr: 12.9
- YTD: (5.1)
Major Shareholders:
- Wee Family: 12.7%
- Wah Hin & Co: 5.2%
Key Financial Metrics (FY24):
- NAV/Share (S\$): 28.11
- CET-1 CAR (%): 15.4
1Q25 Financial Performance Analysis
UOB’s first quarter results showed resilience in several areas:
- Net Profit: S\$1,490m, flat year-on-year and down 2% quarter-on-quarter.
- Net Interest Income: Grew 2% year-on-year to S\$2,409m, although it declined 1.8% quarter-on-quarter, partly attributed to a shorter quarter.
- Net Interest Margin (NIM): Eased slightly by 2bp year-on-year to 2.00% but remained flat quarter-on-quarter. The exit NIM for 1Q25 was 1.98%.
- Loan Growth: Loans expanded by a mid-single-digit 6% year-on-year, driven by wholesale banking and residential mortgages. Geographically, Singapore (+6% yoy) and Malaysia (+7% yoy) were key contributors.
- Non-Interest Income: Total non-interest income saw strong growth. Net fee income reached a record high of S\$694m, growing by a double-digit 20% year-on-year and 22.4% quarter-on-quarter. This growth was fueled by significant increases in loan-related fees (+28% yoy) and wealth management fees (+30% yoy).
- Treasury Income: Treasury income from trading & liquidity management declined 12% year-on-year to S\$466m.
- Deposit Franchise: UOB strengthened its deposit base, with the CASA (Current Account Savings Account) ratio improving by 4.5ppt year-on-year to 55.1%. CASA balance grew 13% year-on-year (retail: +18% yoy, wholesale: +8% yoy), while fixed deposits decreased by 6% year-on-year.
- Operating Expenses: The bank maintained discipline in cost control. Operating expenses increased only marginally by 1% year-on-year, benefiting from lower IT-related expenses (-6% yoy) and other expenses (-9% yoy). Staff costs grew moderately by 4% year-on-year. The cost-to-income ratio improved significantly to 42.6% in 1Q25, down 2ppt year-on-year and 3ppt quarter-on-quarter.
Asset Quality and Provisions
Asset quality showed some signs of strain in 1Q25:
- NPL Formation: New Non-Performing Loan (NPL) formation was elevated at S\$400m.
- NPL Ratio: The NPL ratio inched higher by 0.1ppt quarter-on-quarter to 1.6%, primarily due to fewer write-offs.
- Total Provisions: Total provisions increased significantly by 78% year-on-year to S\$290m.
- General Provisions: UOB set aside S\$133m in general provisions to bolster loan loss coverage.
- Loan Loss Coverage: Loan loss coverage remained stable at 90%.
- Credit Costs: Credit costs were elevated at 35bp in 1Q25, compared to 23bp in 1Q24 and 25bp in 4Q24.
Capital Adequacy
UOB demonstrated resilient capital adequacy:
- CET-1 CAR: The Common Equity Tier 1 (CET-1) Capital Adequacy Ratio was stable at 15.5% on a fully loaded basis, an increase of 1.6ppt year-on-year, following the implementation of Final Basel III Reforms.
Management Outlook and Key Takeaways
During the results briefing, management provided insights into their perspective:
- Guidance Suspension: UOB has suspended its guidance for 2025 due to heightened uncertainties and will resume guidance once the situation stabilizes.
- Asset Quality Stress: Management expects an uptick in NPLs but believes the quantum should be manageable. They do not anticipate a credit crunch, noting that strengthening regional currencies could allow central banks to ease monetary policies and inject liquidity. UOB intends to continue building its buffer for general provisions, targeting 90bp of general provisions/performing loans, up from the current 80bp.
- Impact of Reciprocal Tariffs: Management assessed the direct, first-order impact of reciprocal tariffs as manageable. About 80% of UOB’s wholesale business is domestic or intra-regional. Trade loans constitute 10% of total loans, with 20-30% derived from companies exporting to the US (meaning 2-3% of total loans). Corporate customers exporting 10-25% of their sales to the US account for 2% of total loans. The bank is more concerned about the second-order impact from a slowdown in business investment and domestic consumption.
- Profitability: Despite expecting a slowdown in economic growth, which could pressure loan growth and trade loans, management sees growth in demand for hedging (particularly foreign exchange) and expects UOB to remain profitable.
- Capital Distribution Plan: Management reiterated its commitment to the S\$3b capital distribution plan. This plan includes a special dividend of 50 S cents per share over two tranches in 2025 to mark the bank’s 90th anniversary (total S\$0.8b) and a new share buyback program of S\$2b over the next three years (2025-27). UOB has already commenced the share buyback, having bought back and cancelled 80m shares, representing 4% of the S\$2b target.
Detailed Financial Tables
Profit & Loss (S\$m)
| Year to 31 Dec (S\$m) |
2020 |
2021 |
2022 |
2023 |
2024 |
| Net interest income |
6,035 |
6,388 |
8,343 |
9,679 |
9,674 |
| Non-interest income |
3,141 |
3,401 |
3,232 |
4,253 |
4,620 |
| Net profit (rep./act.) |
2,915 |
4,086 |
4,573 |
5,361 |
5,857 |
| Net profit (adj.) |
2,915 |
4,086 |
4,819 |
5,711 |
6,045 |
| EPS (S\$ cent) |
169 |
239 |
269 |
334 |
356 |
| PE (x) |
20.4 |
14.4 |
12.8 |
10.3 |
9.7 |
| P/B (x) |
1.5 |
1.4 |
1.4 |
1.3 |
1.2 |
| Dividend yield (%) |
2.3 |
3.5 |
3.9 |
4.9 |
5.2 |
| Net int margin (%) |
1.6 |
1.6 |
1.9 |
2.1 |
2.0 |
| Cost/income (%) |
45.6 |
43.9 |
45.7 |
47.3 |
45.7 |
| Loan loss cover (%) |
107.0 |
96.0 |
98.0 |
101.0 |
91.0 |
| Consensus net profit |
– |
– |
– |
– |
– |
| UOBKH/Consensus (x) |
– |
– |
– |
– |
– |
1Q25 Results (S\$m)
| Profit & Loss (S\$m) |
1Q25 |
1Q24 |
yoy % Chg |
4Q24 |
qoq % Chg |
| Net Interest Income |
2,409 |
2,362 |
2.0 |
2,452 |
-1.8 |
| Fees & Commissions |
694 |
580 |
19.7 |
567 |
22.4 |
| Other Non-Interest Income |
554 |
581 |
-4.6 |
442 |
25.3 |
| Total Income |
3,657 |
3,523 |
3.8 |
3,461 |
5.7 |
| Operating Expenses |
(1,559) |
(1,554) |
0.3 |
(1,576) |
-1.1 |
| PPOP |
2,098 |
1,969 |
6.6 |
1,885 |
11.3 |
| Provisions |
(290) |
(163) |
77.9 |
(227) |
27.8 |
| Associates & JVs |
22 |
26 |
-15.4 |
40 |
-45.0 |
| PBT |
1,830 |
1,832 |
-0.1 |
1,698 |
7.8 |
| Net Profit |
1,490 |
1,487 |
0.2 |
1,523 |
-2.2 |
| EPS (S cents) |
87.8 |
87.5 |
0.3 |
89.8 |
-2.2 |
| DPS (S cents) |
0.0 |
0.0 |
n.m. |
117.0 |
n.m. |
| BVPS (S\$) |
29.07 |
26.71 |
8.8 |
28.11 |
3.4 |
Financial Ratios (%)
| Financial Ratios (%) |
1Q25 |
1Q24 |
yoy Chg (ppt) |
4Q24 |
qoq Chg (ppt) |
| NIM |
2.00 |
2.02 |
-0.02 |
2.00 |
0.00 |
| Loan Growth, yoy |
5.7 |
2.1 |
3.6 |
5.2 |
0.5 |
| Deposit Growth, yoy |
3.3 |
3.8 |
-0.5 |
4.8 |
-1.5 |
| Loan/Deposit Ratio |
84.0 |
82.1 |
1.9 |
82.7 |
1.3 |
| Cost/Income Ratio |
42.6 |
44.6 |
-2.0 |
45.6 |
-3.0 |
| ROE |
12.3 |
13.3 |
-1.0 |
13.0 |
-0.7 |
| NPL Ratio |
1.6 |
1.5 |
0.1 |
1.5 |
0.1 |
| Credit Costs (bp) |
35 |
23 |
12.0 |
25 |
10.0 |
| Loan Loss Coverage |
90 |
99 |
-9.0 |
91 |
-1.0 |
| CET-1 CAR |
15.5 |
13.9 |
1.6 |
15.5 |
0.0 |
Balance Sheet (S\$m)
| Year to 31 Dec (S\$m) |
2021 |
2022 |
2023 |
2024 |
| Cash with central bank |
36,558 |
49,419 |
52,350 |
38,577 |
| Govt treasury bills & securities |
22,324 |
31,878 |
38,280 |
46,851 |
| Interbank loans |
38,916 |
35,410 |
35,093 |
37,432 |
| Customer loans |
306,713 |
315,355 |
317,005 |
333,930 |
| Investment securities |
34,856 |
39,789 |
50,793 |
48,472 |
| Derivative receivables |
5,362 |
13,802 |
9,707 |
12,132 |
| Associates & JVs |
1,245 |
1,258 |
1,266 |
1,302 |
| Fixed assets (incl. prop.) |
4,011 |
4,199 |
4,508 |
4,852 |
| Other assets |
9,338 |
13,150 |
14,518 |
14,116 |
| Total assets |
459,323 |
504,260 |
523,520 |
537,664 |
| Interbank deposits |
15,561 |
24,537 |
32,371 |
19,735 |
| Customer deposits |
352,633 |
368,553 |
385,469 |
403,978 |
| Derivative payables |
5,172 |
16,218 |
11,768 |
12,514 |
| Debt equivalents |
35,033 |
41,381 |
37,180 |
42,032 |
| Other liabilities |
8,063 |
9,965 |
10,264 |
9,448 |
| Total liabilities |
416,462 |
460,654 |
477,052 |
487,707 |
| Shareholders’ funds |
42,633 |
43,366 |
46,226 |
49,733 |
| Minority interest – accumulated |
228 |
240 |
242 |
224 |
| Total equity & liabilities |
459,323 |
504,260 |
523,520 |
537,664 |
Operating Ratios (%)
| Year to 31 Dec (%) |
2021 |
2022 |
2023 |
2024 |
| Capital Adequacy |
|
|
|
|
| Tier-1 CAR |
14.4 |
14.4 |
14.4 |
16.6 |
| Total CAR |
16.6 |
16.7 |
16.6 |
18.2 |
| Total assets/equity (x) |
10.8 |
11.6 |
11.3 |
10.8 |
| Tangible assets/tangible common equity (x) |
11.8 |
13.0 |
12.6 |
11.9 |
| Asset Quality |
|
|
|
|
| NPL ratio |
1.6 |
1.6 |
1.5 |
1.5 |
| Loan loss coverage |
96.0 |
98.0 |
101.0 |
91.0 |
| Loan loss reserve/gross loans |
1.3 |
1.3 |
1.3 |
1.2 |
| Increase in NPLs |
11.3 |
0.6 |
(3.8) |
6.0 |
| Credit cost (bp) |
22.2 |
19.1 |
28.7 |
28.1 |
| Liquidity |
|
|
|
|
| Loan/deposit ratio |
87.0 |
85.6 |
82.2 |
82.7 |
| Liquid assets/short-term liabilities |
26.5 |
29.6 |
30.0 |
29.0 |
| Liquid assets/total assets |
21.3 |
23.1 |
24.0 |
22.9 |
Key Metrics (%)
| Year to 31 Dec (%) |
2021 |
2022 |
2023 |
2024 |
| Growth |
|
|
|
|
| Net interest income, yoy chg |
5.8 |
30.6 |
16.0 |
(0.1) |
| Fees & commissions, yoy chg |
20.8 |
(11.2) |
4.3 |
7.2 |
| Pre-provision profit, yoy chg |
9.9 |
14.7 |
16.7 |
5.8 |
| Net profit, yoy chg |
40.2 |
11.9 |
17.2 |
9.3 |
| Net profit (adj.), yoy chg |
40.2 |
17.9 |
18.5 |
5.8 |
| Customer loans, yoy chg |
10.6 |
2.8 |
0.5 |
5.3 |
| Customer deposits, yoy chg |
8.6 |
4.5 |
4.6 |
4.8 |
| Profitability |
|
|
|
|
| Net interest margin |
1.6 |
1.9 |
2.1 |
2.0 |
| Cost/income ratio |
43.9 |
45.7 |
47.3 |
45.7 |
| Adjusted ROA |
0.9 |
1.0 |
1.1 |
1.2 |
| Reported ROE |
9.8 |
10.6 |
12.0 |
12.6 |
| Adjusted ROE |
9.8 |
11.2 |
12.7 |
13.0 |
| Valuation |
|
|
|
|
| P/BV (x) |
1.4 |
1.4 |
1.3 |
1.2 |
| P/NTA (x) |
1.5 |
1.5 |
1.4 |
1.3 |
| Adjusted P/E (x) |
14.4 |
12.8 |
10.3 |
9.7 |
| Dividend Yield |
3.5 |
3.9 |
4.9 |
5.2 |
| Payout ratio |
50.2 |
50.2 |
50.9 |
50.6 |
Segmental Fee Income Breakdown
Fee income saw robust growth across multiple segments in 1Q25, reaching S\$694m. This compares to S\$580m in 1Q24, S\$567m in 4Q24, S\$276m in 3Q24, and S\$273m in 2Q24. The key drivers were:
- Loans / Trade Related: S\$312m in 1Q25 (vs S\$210m in 4Q24, S\$265m in 3Q24, S\$270m in 2Q24, S\$244m in 1Q24)
- Wealth: S\$213m in 1Q25 (vs S\$178m in 4Q24, S\$183m in 3Q24, S\$173m in 2Q24, S\$164m in 1Q24)
- Credit Cards: S\$90m in 1Q25 (vs S\$91m in 4Q24, S\$89m in 3Q24, S\$90m in 2Q24, S\$93m in 1Q24)
- Others: S\$281m in 1Q25 (vs S\$304m in 4Q24, S\$276m in 3Q24, S\$273m in 2Q24, S\$254m in 1Q24)
Total Allowance Breakdown
Total allowances increased significantly in 1Q25 to S\$290m. This figure is composed of:
- Specific Allowance on Loans: S\$156m in 1Q25 (vs S\$439m in 4Q24, S\$296m in 3Q24, S\$169m in 2Q24, S\$158m in 1Q24)
- Specific Allowance on Securities & Others: S\$1m in 1Q25 (vs S\$15m in 4Q24, S\$23m in 3Q24, S\$38m in 2Q24, S\$28m in 1Q24)
- General Allowance: S\$133m in 1Q25 (vs (S\$227m) in 4Q24, (S\$15m) in 3Q24, S\$25m in 2Q24, S\$23m in 1Q24)
Important Disclosures
This report is prepared by UOB Kay Hian Private Limited. It is intended for information only and does not constitute an offer, solicitation, or advice regarding securities. The information is based on sources believed to be reliable, but its accuracy and completeness are not guaranteed, and UOB Kay Hian accepts no liability for reliance on the information. Views expressed are subject to change without notice. UOB Kay Hian and its connected persons may transact with, provide services to, or solicit business from the subject company and other parties dealing in the securities mentioned. They may also have an interest in the subject company. The analyst responsible for this report certifies that the views expressed accurately reflect their personal views and were produced independently, without receiving compensation directly related to the recommendations. Specific disclosures apply for distribution in various jurisdictions including Hong Kong, Indonesia, Malaysia, Singapore, Thailand, the United Kingdom, and the United States. For US persons, this report is distributed to “major U.S. institutional investors” via UOB Kay Hian (U.S.) Inc., a registered broker-dealer, through which any transactions should be executed. The analyst is not FINRA registered.
