When JPMorgan analysts met with investors, they noted that they were focused on UOB’s credit costs and higher non-performing loan (NPL) formation in Greater China, the US and Thailand.
This led JPMorgan to state: “The bank appears to have looked ahead in terms of credit risks during the 3Q2025 review, so that incremental NPL formation moves closer to between 25 basis points (bps) and 30 bps. Overall, we came back less worried on UOB, and hence see the stock holding better than OCBC into 4Q2025 results.” Its banking analyst said he preferred UOB to Oversea-Chinese Banking Corp on Jan 9.
UOB’s top management guided credit costs of 25 bps to 30 bps for 4Q2025 and 2026. JPMorgan’s estimates range from 32 bps to 33 bps.
In the first two weeks of the year, UOB rallied by around 13%. This led JPMorgan to downgrade UOB, placing it behind OCBC in its preference list. Hence, by Jan 23, JPMorgan’s favourite bank is DBS, followed by OCBC and then UOB.
See also: Our 2026 picks: Venture Corporation — Seasoned warhorse biding time before next charge
“The rally came on the back of expectations of q-o-q improvement in 4Q2025 post a spike in provisions in 3Q2025,” JPMorgan said in a Jan 23 report. “We broadly concurred with the short-term view, which, along with low valuations, led us to upgrade the stock in November 2025. Yet, we do not see asset quality issues fully cleared in 4Q2025, even if the quarter appears closer to business as usual. Accordingly, we expect negative consensus revisions in 2026, leading to a stock de-rating. The key risks stem from the Hong Kong CRE portfolio and from consistently high credit costs in Thailand, as reflected in 2026 guidance from large Thai banks. US CRE risk, as well as tighter liquidity in Indonesia, are further potential drivers of earnings risk,” JPMorgan details.
JPMorgan’s bearish Jan 23 report further details UOB’s asset quality issues. The report notes that non-performing assets (NPAs) in Greater China were $508 million, up 51% y-o-y (in 3Q2025), led by Hong Kong CRE, while Rest of the World NPAs were $469 million, led by US CRE. ”These figures don’t bode well for UOB,” JPMorgan said. If the loan loss ratio (LLR) to loans drops below 1%, de-rating will follow as investors will price in higher provisions in the future, it adds.
Bloomberg’s estimate for UOB’s 4QFY2025 net profit is $1.43 billion, down 3.2% y-o-y, compared to a net profit of $1.478 billion in 4QFY2024. For FY2025, Bloomberg has UOB’s net profit at $4.661 billion, down from the $6.233 billion reported in FY2024. The y-o-y decline in full-year net profit is due to a pre-emptive move to add $615 million to general provisions in 3Q2025.
See also: Our 2026 picks: Altria Group — Be hooked on investing in Altria Group in good or bad times
On Feb 9, DBS reported a spike in specific provisions from its Greater China CRE portfolio and a rise in a specific provision in Singapore. ECL 3 (specific provisions) was $415 million for DBS in 4Q2026. However, the bank was able to write back $205 million in general provisions because it has around $2.4 billion in management overlay. Hence, DBS can continue to report specific provisions this year with a minimal impact on its Profit and Loss (P&L) statement.
In November last year, UOB group CEO Wee Ee Cheong said in his prepared remarks: “We proactively set aside general allowances to significantly enhance provision coverage”. UOB reports FY2025 results on Feb 24. If UOB’s specific provisions normalise, the stock could attract investor interest.
