RHB warns UOB faces margin loan and asset quality risks

Commercial real estate remains a concern despite signs of improvement in some markets.

United Overseas Bank (UOB) said it is taking a more cautious approach to lending as the conflict in the Middle East continues to create uncertainty over supply chains, inflation and energy prices.

The bank said its core markets have remained resilient so far, but it is closely watching developments that could affect business activity, according to an RHB research note.

It warned that companies may delay drawing down loans and postpone capital spending if business confidence weakens.

UOB said first-quarter 2026 loan growth rose 4% from a year earlier, slightly above its low single-digit target, supported by wholesale banking and home loans. 

It also saw higher use of trade finance facilities, which it said may have been driven by businesses stocking up ahead of expected price increases.

The bank is keeping its loan growth guidance unchanged for now, but said the outlook remains uncertain.

UOB is also watching credit risks in Indonesia and Thailand, where high household debt and foreign exchange movements could put pressure on borrowers. 

The bank said these two markets account for about 11% of its total loan book, limiting its overall exposure, and added that it has been selective in extending credit there.

Commercial real estate remains another area of concern, although UOB said there have been signs of improvement. 

It said higher property valuations have helped recovery efforts in the US, whilst improving conditions in Hong Kong's residential market could eventually support the commercial property sector.

RHB also identified weaker-than-expected net interest margins, slower loan growth, a sharper deterioration in asset quality, and challenges in integrating Citi's consumer business as the main downside risks for UOB.