UOB lowers outlook on tariff impact after 6% drop in Q2 profit; shares fall 1.8%

SINGAPORE – UOB on Aug 7 posted a 6 per cent drop in net profit for the second quarter of 2025 as interest rates declined, with the lender trimming its outlook for the year, citing the impact of US tariffs.

Net profit for the three months to June 30 was $1.34 billion, down from $1.43 billion in the year-ago period, missing the $1.48 billion forecast in a Bloomberg poll of analysts.

This was also a 10 per cent drop compared with its earnings of $1.49 billion in the previous quarter, which was also below analyst expectations.

UOB shares closed down 1.8 per cent, or 64 cents, at $35.81 on Aug 7, after its results announcement.

UOB declared an interim dividend of 85 cents a share for the half-year, down from 88 cents a year ago. Shareholders will also get a second tranche of a special dividend of 50 cents per share – part of the bank’s capital distribution package announced in February. 

Net interest income for the quarter fell 3 per cent to $2.34 billion. This came as net interest margin (NIM) dropped nine basis points from the first quarter to 1.91 per cent.

Net fee income rose 3 per cent to $636 million – the bank’s second-highest for a quarter – with broad-based growth across wealth management, loan-related services and credit card fees.

For the first half-year, net profit fell 3 per cent year on year to $2.83 billion. UOB cited a pre-emptive general allowance set aside as part of the group’s risk management measures amid macroeconomic uncertainties.

Operating profit for the half-year rose 3 per cent to $4 billion, underpinned by broad-based double-digit growth in fee income.

UOB announced its guidance on earnings for full-year 2025, after it had put a pause in the first quarter owing to economic uncertainty surrounding tariffs.

It forecast a NIM growth of 1.85 per cent to 1.9 per cent, with low single-digit loan growth and high single-digit fee growth.

This is lower than its original 2025 estimation at its fourth-quarter results briefing in February, where it forecast high single-digit loan growth and double-digit fee growth.

At a media briefing on Aug 7, UOB chief executive officer Wee Ee Cheong attributed the bank’s trimmed outlook to the muted economic growth of its Asean markets due to the impact of tariffs.

While UOB forecasts the first-order impact of tariffs to be manageable, it is concerned about the second-order impact on consumer spending and investment.

Mr Wee, who is also the bank’s deputy chairman, added that while the bank is conservative in its outlook, it remains confident in the long-term prospects in South-east Asia as the world transitions to a multipolar world order.

The bank has an increased presence in Malaysia, Thailand, Vietnam and Indonesia after acquiring Citibank’s consumer banking business in the four countries in 2023.

“We are the big elephant in the room now,” said Mr Wee of the bank’s larger customer base in the region, estimated to be more than 8.4 million.

“We have to capitalise on that and increase our consumer offerings with lifestyle products, and also cross-sell wealth products and accounts in a multi-pronged approach.”

He cited digital and green economies, as well as infrastructure investments and customer service improvements, as priorities for growth.

Chief financial officer Leong Yung Chee said that despite market volatility leading to significant shifts in the environment, growth in loan-related services and fee income is testament to the bank’s strong franchise.

He added that the bank’s forecast for the three-month Singapore Overnight Rate Average will fall to around 1.7 per cent at the end of the year, as it anticipates three more rate cuts by the US Federal Reserve over the next few months.

Banks are seeing their NIMs squeezed, with interest rates low or falling, as the difference between what they earn on loans and what they pay on deposits narrows.

UOB announced on Aug 1 that it will be cutting rates for its flagship UOB One account from Sept 1 – the third such reduction in the past two years.

It had previously reduced its rates from 4 per cent to 3.3 per cent on May 1.

This follows on the heels of OCBC Bank, which dropped rates for the second time in 2025 on its 360 account from Aug 1.