UOB gross NPL rises 2% in 3Q15

And it’s expected to rise even further.

According to a report by RHB, UOB’s nonperforming loans (NPL) saw a 2% growth in 2015’s third quarter, which resulted in a moderate year to date increase of 8.2%. Indonesia and Greater China NPLs rose by 11%, but the bulk of the increase was due to a 12% QoQ growth of its Singapore loan book. While UOB management believes that NPLs would rise further, it does not expect any sharp increases such as those during the Asian financial crisis.

RHB notes that UOB’s asset quality remains resilient with gross NPL ratio remaining at a low 1.26%. Singapore, Greater China and Indonesia NPL ratios stood at 0.9%, 0.7%, and 3.4%, respectively.

Despite two loans of customers in the support industries for the commodity sector that turned NPL, the asset quality of UOB’s Indonesia book was relatively stable in 3Q15. Further, UOB management believes that any increases in the Indonesia book’s NPLs would be small.

Meanwhile, the bank has been guarded regarding its Malaysia loan portfolio. UOB has been very careful not to participate in the mass market and general economy, and therefore has no large NPLs in Malaysia.

The bank’s Thailand loan portfolio is reportedly very stable, and the bank’s management believes that the Thailand loan portfolio has over-provided for NPLs. UOB’s NPL base is not increasing despite having written off one loan.

“All in, management does not expect massive asset quality deterioration,” the report said.