(Dec 17): A large wager on Hong Kong and China real estate is backfiring on one of Singapore’s top banks, which is facing up to mounting troubles in the region’s deteriorating property markets.
United Overseas Bank Ltd (UOB) over the years financed real estate abroad including hillside luxury homes in Hong Kong, a five-star hotel overlooking the city’s central harbour, shopping malls and a Shanghai life science park. It also lent to Chinese developers. More than 40% of the loans its Hong Kong branch made were property-related as of June, a higher concentration than some other banks in the Chinese territory.
This year, the family-controlled lender has had to work through multiple deals where borrowers struggled to refinance or defaulted on, and is paring its overall Greater China exposure.
UOB jolted investors in early November when it booked $615 million (US$476 million) in general provisions for commercial real estate loans that could go bad in the future, pushing up its total allowance for credit and other losses to $1.9 billion in the first nine months of 2025. The bank said it took proactive steps in light of continued “sector-specific headwinds” in Greater China and the US.
In the weeks since the results, investors have fixated on UOB’s commercial real estate risk and the bank’s “kitchen-sink” clean-up, said Ivan Ng, an analyst at Autonomous Research.
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UOB shares are down 4% in the year to date, while Singapore peers DBS Group Holdings Ltd and Oversea-Chinese Banking Corp (OCBC) are up about 27% and 16% respectively. Even though UOB said the charge won’t affect its dividend and buy-back programme, “investors remain sceptical, fearing that further commercial real estate-related provisions could eventually pressure capital returns”, Ng wrote in a report this month.
A significant portion of UOB’s troubled property exposure is in Hong Kong, which is in the throes of a multi-year commercial real estate downturn, with prices of office units down roughly 50% from peak levels. That has eroded the value of the collateral backing many property loans, in some cases resulting in losses for banks when borrowers default. The situation in mainland China is also worsening.
UOB’s Hong Kong branch had more than HK$69.2 billion ($11.5 billion) in total property development and property investment loans as of June 2025, according to a regulatory filing. They made up 43% of the unit’s gross loans and advances to customers, the filing showed.
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UOB’s latest filings showed the group had $48 billion in total customer loans in Greater China at the end of September, with a non-performing loan ratio of 3.1%, up from 2% a year earlier. The group’s overall non-performing loan ratio was 1.6% as of September.
The Hong Kong Monetary Authority (HKMA), the city’s de facto central bank and financial regulator, has been monitoring lenders’ exposures to the property sector. UOB has had discussions with the HKMA about its lending mix and diversifying its portfolio, said people familiar with the matter who asked not to be identified sharing non-public information.
A HKMA spokesperson said the regulator does not comment on the affairs of individual banks, and that it has all along required banks to prudently manage their credit risk.
Loan extensions
UOB has held off on demanding repayment on some Hong Kong and China real estate loans that matured in the past year, and has worked with clients to renegotiate loan terms and roll over their debt, according to people familiar with the matter.
“UOB is committed to doing right by our customers through the ups and downs of economic cycles,” a bank spokeswoman said in response to Bloomberg News queries. “We take a long-term view of banking relationships and work closely and constructively with customers facing challenges, offering appropriate solutions while safeguarding the interests of our stakeholders,” she added.
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The spokeswoman said the lender is doing its best “to support our clients to tide over short-term challenges, while ensuring that the bank’s prudent credit principles are not compromised”. She added that UOB “adheres to strict credit standards and principles in full compliance with regulatory requirements”.
Last month, UOB was among lenders that reached an eleventh-hour agreement to extend the maturity date of a US$110 million loan backed by a life science park in Shanghai. The property is controlled by Gaw Capital Partners, a private equity firm that UOB has financed multiple deals for.
During the recent deal negotiations, UOB and a few banks were prepared to grant a three-year extension that the borrower requested, but there was pushback from other lenders, according to people familiar with the matter.
In the end, the banks agreed to give the Gaw-managed fund an additional 18 months to repay the loan, whose principal was reduced slightly, with another 18-month extension if certain conditions are met, Bloomberg News reported.
In May, UOB was also among lenders that amended and extended a loan backing two Hong Kong office towers called Cityplaza Three and Four that are also owned by a Gaw Capital fund.
UOB more recently led the refinancing of a US$940 million loan for cash-strapped Hong Kong builder Parkview Group Ltd following months of negotiations, people familiar with the matter said. The debt is tied to a Beijing shopping mall called Parkview Green, which hasn’t been generating sufficient rental income to cover the loan’s interest payments, Bloomberg News previously reported.
The UOB spokeswoman said the bank cannot comment on individual deals due to client confidentiality. She added that “in general, loans for refinancing are often complex”.
There have been some defaults. In March, a consortium including Schroders Capital and an Asian fund managed by British investment firm Chelsfield failed to repay a HK$1.5 billion loan collateralised by an underground shopping mall called Worfu in Hong Kong’s North Point district when the debt matured.
UOB, which had a majority share of the loan, waited a month before sending a letter to the borrowers demanding repayment, according to people familiar with the matter. The banks appointed receivers for the asset in August.
Within UOB, there have been tensions over the outlook for the regions’ properties. Some credit officers have wanted business teams to examine struggling borrowers’ real cash flow and push for solutions, according to people familiar with the matter, while other staffers have preferred to work out loan extensions in the hopes that the market will recover, the people said.
Family ties
Singapore’s billionaire Wee family, which controls UOB, built much of their early fortune in property. They have long regarded real estate as a safe and reliable asset class, according to people familiar with the matter.
After China’s property downturn took hold, UOB chief executive officer Wee Ee Cheong said on a 2022 earnings call that the bank’s exposure to Chinese developers was manageable and not something he was overly concerned about. That year, UOB took over a loan to troubled Shanghai-based developer Shimao Group from other banks.
By 2024, UOB’s leadership spoke about challenges, accelerating provisions “on a few chunky accounts” they had previously hoped to restructure.
In September this year, UOB extended the maturity of the HK$10 billion loan financing a Hong Kong luxury residential development called Beacon Peak that Shimao developed. It had earlier sought to offload the debt to private credit investors, Bloomberg News reported.
UOB’s expected losses from income-producing real estate loan exposures are the highest among Singapore’s big three banks, said Rena Kwok, a Bloomberg Intelligence analyst. She said the provisions taken in the recent third quarter will help “to cushion potential credit losses given pockets of stress in its book”.
