Brexit woes to slow down UOB’s loan growth, analysts say

Bad loans are also expected to jump.

UOB will be feeling the ripples of Brexit soon as analysts say the slower economic growth brought about by the UK’s ‘leave’ vote from the European Union will muddy up the bank’s loan growth.

According to analysts from RHB Research, NPL ratio will keep rising over the next few quarters, with a 2% assumption by end-2017, up from 1.4% as at 1Q16.

“In light of the weakening systemic loan growth of -1.2% YTD for end-May (although there was a MoM rise of 0.5%), we have lowered our 2016 UOB loan growth forecast to 0.5% (from 3%). Our 2017 loan growth forecast is also an unexciting 3.5% (from 4.5%),” RHB said.

Meanwhile, RHB said management guided for flattish NIMs through 2016.

“As UOB’s current account-savings account (CASA) accounts for 47% of total deposits, the firmer Singapore Interbank Offered Rate (SIBOR) (0.93% current 3-month SIBOR vs c.0.85% in 2Q15) should help to widen NIMs on a YoY perspective,” RHB added.