The Terrific Trio of Singapore‘s banks have typically moved in sync. While all three banks share similarities and each has its own strengths versus one another, they’ve generally reported good or average results together, albeit with some differences in quantum.
But the latest Q3’25 results caught many investors by surprise, myself included.
It also triggered a divergence in share price movements – DBS Group Holdings Ltd (SGX: D05) and Oversea-Chinese Banking Corporation Ltd (SGX: O39) reported great results, while United Overseas Bank Ltd (SGX: U11) posted a steep -72% YoY decline in net profit for its third quarter.
Why did UOB slumped while DBS and OCBC shined? Should UOB investors be concerned?
What pulled UOB results down?
While headlines have been focused on the spike in allowance for credit losses (which we will get to later), the overall picture is just as befuddling.
DBS eked out a modest total income growth of +3% YoY for Q3’25, OCBC was flattish. But UOB bucked the trend by being the first to report a contraction of -8% YoY.
Sluggish performances across both interest and non-interest income pulled down UOB’s total income, which is the main crux of the contraction of its operating profit by -16% YoY.
While all 3 banks cite NIM compressions affecting operating income, net profit was either flat or buffeted marginally for DBS and OCBC, unlike UOB’s -16% YoY.
Dissecting the allowance for credit losses
A deeper dive into the root cause of UOB’s ballooning allowance for credit losses start painting some concerns and clarity for existing UOB and would-be UOB investors.
The main culprit is coming from the Group Wholesale Banking segment. The bank cites that allowances were set aside as a prudent measure in response to evolving macroeconomic and credit conditions in selected markets.
Giving that SEA is the stronghold of UOB and also at the crossfire of Trump’s tariff laden regime, the bank had to set aside allowances in anticipation that the tariffs would continue to play an adverse impact to ASEAN countries. And with its exposure to China, the NPL for China also continue to climb.
And given that the top line has cratered, it all but paints a sudden storm that could be brewing for UOB in the upcoming quarters.
Bright sides of UOB’s results
The overall financials might paint a gloomy picture, but there are still bright spots.
Loan growth remains ferocious, and trade loans are still robust. Its wealth income continues to ride on Singapore position as a strategic financial and wealth hub.
Yes, the financials and the credit allowances may take centre stage and weigh on share prices in the coming days, but I think UOB would eventually stabilise its operations.
Long-term investors might view this as an opportunity to add on to UOB, if this setback and its “ASEAN First” vision is temporarily affected.
Verdict
UOB has never been the top-performing bank when compared to DBS. But it is still one of the stocks that has been proven to generate above market returns.
Yes I have seen fin-fluencers bashing UOB while comparing it to DBS and OCBC. Their arguments might not be wrong, but taking advantage of UOB’s malaise to grow follower counts – this I digress.
To me, UOB still offers value and a great dividend yield for newbies who are trying to hone their patience and long-term investing appetite.
But if it’s simply a discussion about which bank is better, then there’s no need for debate as it would be too shallow to go down that discussion route.
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