[SINGAPORE] A strong balance sheet and capital base will help UOB navigate the uncertainties arising from US tariffs, said deputy chairman and chief executive officer Wee Ee Cheong.
Speaking at the bank’s first-quarter earnings call on Wednesday (May 7), he noted that trade forms only about 10 per cent of the bank’s total loans portfolio, limiting its direct exposure.
“In fact, most of our trade finance lending continues to be done within the region, reflecting strong intra-regional activities,” he said, noting that 80 per cent of the bank’s trades are “domestic business intra-region”.
He was referring to UOB’s S$3 billion capital distribution plan, announced in February, which will proceed as planned.
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The bank also said on Wednesday that it will halt its 2025 earnings guidance, and plans to resume this once the macroeconomic situation stabilises.
Group chief financial officer Leong Yung Chee added that while the pandemic caused a “sudden shutdown” in some industries, the current situation was more of a “slowdown” and adjustment of supply chains, with some potential cost increases.
“You would see a period of volatility and adjustments, but I think the severity is… going to be moderated over time,” said Leong, who took on his current role in April.
On trade, the “first-order impact” from US tariffs has been assessed through a portfolio analysis, Wee said.
While some customers have between 20 and 40 per cent of their exports going to the US, the analysis found that this was “not really a major concern” for the bank.
The greater severity lies in the “second-order impact” – a potential drop in consumer confidence triggered by tariff uncertainties – though the extent of this is still unfolding.
“If the uncertainty continues, then it will affect consumer confidence,” Wee said. “This is where the slowdown in the economy will come in.”
Flat Q1 profit
The bank on Wednesday reported a net profit of S$1.49 billion for the first quarter ended Mar 31, 2025, unchanged from a year ago, and below the S$1.54 billion consensus forecast in a Bloomberg survey of five analysts.
Net interest income rose 2 per cent to S$2.41 billion, driven by strong loan growth, though net interest margin (NIM) edged down to 2 per cent from 2.02 per cent the year before.
Net fee income jumped 20 per cent to S$694 million, supported by robust loan-related and wealth activities; other non-interest income fell 5 per cent to S$554 million on lower trading and investment income.
UOB’s non-performing loans ratio rose slightly to 1.6 per cent from 1.5 per cent, while credit costs climbed to 35 basis points (bps) in Q1, from 25 bps in Q4, as the bank set aside more pre-emptive allowances.
“With credit costs rising over 50 per cent (against Q1 2024) to boost provision coverage, the bank has sufficient buffers to guard against further asset-quality slippage,” said Bloomberg Intelligence analysts Sarah Mahmud and Diksha Gera in a note.
“Though lending could slow with new US tariffs, UOB’s wide South-east Asian footprint positions it well to serve businesses as supply chains shift,” they added.
Jefferies equity analysts Sam Wong, Chen Shujin and Joanna Cheah described the bank’s results as “broadly in line” with consensus, though “marginally below” their firm’s forecasts.
Key positives from the Q1 results included strong non-interest income growth, stable quarter-on-quarter NIM and cost control, with operating expenditure unchanged from the same period the year before, the analysts said.
UOB is the first of Singapore’s three local banks to report Q1 earnings; DBS and OCBC are set to release their results on Thursday and Friday, respectively.
The lender’s shares closed 1.4 per cent or S$0.49 lower to S$34.49 on Wednesday.
