UOB under threat as ASEAN asset quality crumbles

Indonesia is the toughest spot.

United Overseas Bank (UOB)’s overall non-performing loan ratio stayed mercifully flat at 1.2% in the first quarter, but analysts warn that the bank’s ASEAN portfolio might be under threat.

CIMB analysts Kenneth Ng and Jessalyn Chen noted that UOB booked more non-performing loans in Thailand and Indonesia during the quarter. Thailand’s NPL ratio grew by 10 basis points, while Indonesia’s NPL ratio increased by 20 basis points.

“Indonesia remains a tough spot, with 2Q expected to remain weak as UOB continues to aggressively relook at the portfolio and clean up its book. Indonesia’s PBT contribution fell 77% qoq to just S$10m in 1Q15,” the analysts noted.

In its home market, UOB suffered NPLs from two big shipping accounts and a small increase in the private banking space, though the mortgage portfolio has been holding up well.

Krishna Guha, equity analyst at Jefferies Singapore, added that gross non-performing assets grew 3.5% quarter-on-quarter, driven by couple of accounts in SG and ID plus translation effects.

“Asset quality is still benign but ASEAN (especially Indonesia) pose risks Management reiterated cautious stance in MY and ID but expressed confidence about asset quality in TH. Based on our detailed look at corporate credit risks, we stay cautious on asset quality front,” Guha noted.