UOB lowers interest rate for fixed deposits to 1.5% in Q3

Mortgage rates were also cut 20bp to about 2%.

United Overseas Bank (UOB) has lowered the interest rate for fixed deposits to 1.5% in Q3 from 1.8% previously, amidst risks of the overall net interest margin (NIM) compressing due to lower policy interest rates in the region although NIM could remain resilient in Singapore. Fixed deposits make up 52% of the total deposits.

Mortgage rates were also cut by 20bp to about 2%.

The bank said that it is committed to maintaining its dividend payout ratio at 50% as long as CET-1 CAR stays above 13% and it achieves RORWA of 1.60-1.65%.

Also read: UOB net profit up 8% to $2.2b in H1

Expected credit loss (ECL) is not projected to be significant due to low LTV ratio of 53%, added UOB.

Exposure to unrest-riddled Hong Kong is also minimal compared to other banks, the bank said. UOB only has one branch focusing on wholesale banking in the city, which accounts for $12b or only 4.4% of total loans. UOB’s exposure to Hong Kong is primarily in the real estate, hospitality and consumer discretionary sectors. In particular, real estate loans for commercial buildings account for $8b or three quarters of its exposure to Hong Kong.

On the topic of loans, UOB’s management expects mid- to high-single-digit loan growth for 2019 due to a strong pipeline from the manufacturing and real estate (commercial properties) sectors.

UOB’s cross-border revenue also grew 19% YoY in the first five months of 2019 and accounted for 27% of Group Wholesale Banking (GWB) income, tapping on intra-regional flows within Southeast Asia and from China to Southeast Asia.

Meanwhile, the bank said that slowdown in the macroeconomy could result in some accounts migrating from stage 1 (12-month expected credit loss) to stage 2 (lifetime expected credit loss), which will lead to higher general provisions. This could lead to a slight increase in UOB’s credit costs in H2.