UOB resumes guidance for FY2025 with trimmed forecasts amid Q2 earnings miss

[SINGAPORE] UOB has resumed guidance on its full-year 2025 targets after briefly pausing them in the first quarter, but the projections are now broadly lower.

The bank now expects net interest margin (NIM) for FY2025 to come in at between 1.85 and 1.9 per cent, down from its earlier forecast of around 2 per cent.

It also expects loan growth to be in the low single digits and fee income to rise by a high single-digit percentage.

This is more conservative than its December 2024 outlook, which projected high single-digit loan growth and double-digit fee growth.

A projection for credit costs of around 25 to 30 basis points remains unchanged.

The lower guidance reflects expectations of limited growth in Asean due to the US tariff situation, said UOB deputy chairman and group chief executive officer Wee Ee Cheong.

He was speaking at the bank’s second-quarter results briefing on Thursday (Aug 7), where UOB posted a 6 per cent decline in net profit to S$1.34 billion for the three months ended Jun 30.

This missed the S$1.48 billion consensus estimate in a Bloomberg poll of six analysts.

UOB group chief financial officer Leong Yung Chee said gross domestic product figures in each of the bank’s key markets have been revised downward.

“The environment has shifted significantly,” said Leong. “But for some of these metrics, if you look at the underlying numbers that we are still projecting, it actually shows the strength of the franchise.”

For June, UOB posted an exit NIM of 1.84 per cent. In Q2, net interest income fell 3 per cent year on year to S$2.34 billion, as NIM declined 14 basis points to 1.91 per cent from 2.05 per cent.

Leong said the full-year NIM projection of 1.85 to 1.9 per cent rests on three main assumptions.

First, that the three-month compounded Singapore Overnight Rate Average (Sora) – which fell by about 50 basis points in Q2 – will end 2025 at about 1.7 per cent per annum. As of Wednesday, Sora stood at 1.8 per cent per annum.

“There’s probably a little bit more room (to fall), because we are expecting three more rate cuts from the Fed through the end of the year,” said Leong.

Second, the impact from recent deposit rate cuts – including the flagship UOB One account, which was cut for the second time in 2025 on Friday – will only be felt in the second half.

Third, that the one-month Hong Kong Interbank Offered Rate will recover and stabilise to around 1.6 per cent by year-end, after falling nearly 200 basis points in Q2.

While UOB’s Hong Kong dollar exposure is just 6 per cent of its loan book, there is still an impact because of significant shifts in the exchange rate, Leong said.

Special dividend

UOB declared an interim dividend of S$0.85 per share for the half-year ended Jun 30, slightly down from S$0.88 a year ago.

A second tranche of its S$0.50 per share special dividend – amounting to S$0.25 per share – will also be paid to shareholders.

Non-interest income rose 5 per cent year on year to S$1.13 billion, with broad-based growth across wealth management, loan-related services and credit card fees. Customer-related treasury income also improved, along with better trading and liquidity management.

The bank’s non-performing loan ratio rose marginally to 1.6 per cent, from 1.5 per cent a year earlier. Total allowances rose 20 per cent to S$279 million.

For the first half of 2025, net profit declined 3 per cent year on year to S$2.83 billion. Total income rose 2 per cent to S$7.12 billion, from S$7 billion in the same period last year.

As at 10.50 am on Thursday, shares of UOB were down S$0.55 or 1.5 per cent at S$35.90.