Shaky mortgages exacerbate UOB's surprisingly weak Q2 results
SINGAPORE: Lower trading income is the conspicuous culprit behind UOB's unexpectedly weak Q2 results, but analysts are also raising the alarm over the bank's shaky housing loans. CIMB noted that UOB booked higher specific provisions (SPs) during the quarter due to weakness in its mortgage book, particularly Singapore housing loans.
"UOB had a significant jump in SPs this quarter on the back of Singapore mortgage NPLs (now 38bp of loans vs. 27bp previously), Malaysia, and Indonesia's commodity and SMEs NPLs," CIMB said.
However, overall non-performing loan (NPL) ratio remained stable because of a general provision (GP) write-back.
"Total provisioning (32bp) held stable only because it trimmed GP this quarter. UOB guides that SPs were pre-emptive and should recede in 3Q, but we raise our FY15 LLP assumptions to 33bp of loans," CIMB said.