Among Singapore’s three major banks, UOB should be least affected by the rise in bond yields, as it has the lowest ratio of assets held in bonds at 12 percent, according to Nomura.
UOB has also been actively lowering the duration on its portfolio, as evidenced by the sharp fall in the average yield on its investment securities.
“Thus, we believe it is well-positioned to capture the yield up-cycle through capitalising on gapping opportunities. UOB is also conservative on loan provisioning, having built up a significant general provision reserve that is above industry average,” said the research house.
Nomura is also confident that UOB has the capacity to handle any sudden increases in non-performing loans (NPLs).
“We forecast a loan CAGR (compound annual growth rate) of 10 percent over the next three years. However, in a worst-case scenario where mortgage growth rates collapse to five percent next year from the current growth rate of 15 percent, group loan growth could slow to 7.5 percent,” Nomura added.
Singapore’s top banks are DBS, UOB and OCBC.
Nikki De Guzman, Junior Journalist at PropertyGuru, edited this story. To contact her about this or other stories email nikki@propertyguru.com.sg
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