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Singapore Bank's Asia Property Bets Backfire
17 Dec
Summary
- UOB booked S$615 million in provisions for bad loans.
- Hong Kong office prices are down 50% from peak.
- The bank is renegotiating loan terms with struggling clients.
United Overseas Bank (UOB) is confronting substantial challenges stemming from its significant investments in Hong Kong and China's deteriorating real estate markets. The bank has proactively set aside S$615 million in provisions for commercial real estate loans that may default, reflecting ongoing sector-specific headwinds in Greater China and the US.
This exposure, particularly concentrated in Hong Kong where office prices have plummeted by approximately 50% from their peak, has eroded collateral values and increased risks. UOB's Hong Kong branch has a significant portion of its loans tied to property development and investment, contributing to a rise in the group's non-performing loan ratio in Greater China to 3.1% as of September 2025.
In response, UOB is actively engaging with borrowers, renegotiating loan terms, and extending maturities for stressed real estate assets. Despite these efforts and reassurances about dividends, investors remain cautious about potential future provisions pressuring capital returns, as the bank navigates the complex property downturn.
