Highlights

• Growth in wealth management fees was muted at 1% yoy in 2Q26. Trading and investment income also declined 8% yoy. Non-interest income was 
  supported by non-recurring gains from asset divestments. 
   
• NPL formation was hefty at S$902m during the quarter due to a single closely monitored real estate account in Greater China. NPL ratio increased 0.1ppt
  qoq 1.6%. Credit costs of 28bp were within guidance of 25-30bp. 

Analysis

• United Overseas Bank (UOB) reported net profit of S$1,478m for 2Q26 (+10% yoy and +3% qoq), slightly above consensus estimate of S$1,452m. 
   
• NIM pressure persisted. Customer loans grew 5% yoy and 2% qoq to S$361b, supported by wholesale banking and regional ASEAN activity.
  Trade loans increased 33% yoy group-wide and 14% yoy across ASEAN-4 markets. Net interest income declined 2% yoy to S$2,297m as net interest
  margin (NIM) compressed 17bp yoy and 8bp qoq to 1.74%, reflecting lower benchmark interest rates and asset yield compression. Management 
  maintained full-year NIM guidance of 1.75-1.80%. 
   
• Moderate growth in fee income. Net fee income rose 5% yoy and 4% qoq to S$665m. Wealth management fees grew 1% yoy to S$288m, supported
  by client engagement and increased conversion of deposits into investments. High-net-worth AUM increased 7% yoy to S$204b, while net new money
  inflows amounted to S$4b during 1H26. Loan-related fees from capital market activities were softer. 
   
• Benefitted from asset divestment gains. Other non-interest income increased 28% yoy and 37% qoq to S$632m, supported by non-recurring 
  gains from asset divestments. Trading and investment income declined 8% yoy to S$379m due to lower trading and liquidity management activities,
  although customer-related treasury income remained resilient. 
   
• UOB has announced the disposal of its remaining property interests in Novena Square and 230 Orchard Road (currently being redeveloped into
  the NoMad Hotel). The transaction includes the sale of UOB's 20% stakes in Novena Square Development and Novena Square Investments for S$299m,
  the sale of its Novena Square banking hall for S$19.5m, and the disposal of its 8.3% interest in the Orchard Road redevelopment site for S$68.5m. Total
  cash proceeds amount to S$387m. UOB will continue to operate its branches at both locations through lease arrangements.
   

• Increase in expenses is greater than growth in income. Total expenses rose 6% yoy and 7% qoq to S$1,629m. UOB continued to invest in talent, 
  technology and strategic business initiatives. Cost-to-income ratio deteriorated to 45.3% in 2Q26 from 44.3% in 2Q25. 
   
• Asset quality affected by Greater China real estate downgrade. NPL ratio increased 0.1ppt qoq 1.6%. NPL formation was hefty at S$902m during the 
  quarter due to a single closely monitored real estate account in Greater China. Total allowances declined 24% yoy to S$211m due mainly to the
  release of general provisions of S$97m. Credit costs were 28bp in 2Q26, within the guided range of 25-30bp. Loan-loss coverage stood at 88%. 
   
• Fully-loaded CET-1 CAR eased 0.2ppt qoq to 15.0% due to the payment of 2025 final dividends. All-currency liquidity coverage ratio was 159%, while
  the net stable funding ratio stood at 114%. UOB declared an interim dividend of 88 S cents per share, representing a payout ratio of 50%. 40% of its S$2b
  share buyback programme had been completed as of Jul 26. 
   
• Toned-down guidance for 2026. UOB maintained its guidance for low single-digit loan growth and NIM at 1.75-1.80% for 2026. It expects SORA to
  have bottomed and to trend higher in 2H26. It downgraded guidance for fees from high single-digit to low single-digit, due to: a) investment banking deals being pushed into 2H26, and b) credit card fees being affected by the shift in spending towards items with lower interchange fees and higher expenses caused by air miles redemption. Operating expenses are projected to increase by low single digits. Guidance for total credit costs is maintained at 25-30bp. 
   
• UOB plans to roll out new initiatives in 2H26, including enhanced advisory capabilities and new product launches. It will step up hiring of relationship
  managers (RMs). Its recent launch of United CIO Funds was well received. 58% of AUM is derived from overseas markets, predominantly ASEAN 
  countries. The contribution from North Asia is smaller but growing rapidly. Management targets to double wealth income over the next five years by
  2030. UOB has a base of 40 relationship managers in Hong Kong. It will evaluate setting up a second booking centre in Hong Kong.