Moody's Affirms United Overseas Bank's High Ratings Despite Macroeconomic Risks

Strategic Insights -

United Overseas Bank Limited (UOB), a major bank in Singapore, has been affirmed by Moody's Investors Service with high ratings of Aa1 deposits and senior unsecured debt. This decision, announced in a recent news release, reflects Moody's expectation that UOB will maintain strong fundamentals through 2025-2026. The affirmation is based on the bank's ability to withstand various risks, including asset risks from its modest exposure to trade-oriented companies and its significant exposure to the property sector in Hong Kong SAR, China. Moody's also expects UOB to maintain a strong capital buffer and liquidity, which will support its credit ratings.

Key Takeaways:

  • Moody's has affirmed UOB's Aa1 deposits and senior unsecured debt ratings, citing the bank's strong fundamentals and ability to withstand macroeconomic risks.
  • The affirmation is based on Moody's expectation that UOB will maintain a problem loan ratio between 1.5% and 2.5%, a core capital ratio of above 14%, and profitability at a solid level through 2025-2026.
  • UOB's a1 Baseline Credit Assessment (BCA) reflects the bank's asset risk from trade-oriented companies and its exposure to the property sector in Hong Kong SAR, China.
  • Moody's expects UOB to maintain a strong capital buffer, with a Common Equity Tier 1 ratio of 14% by 2026, and a return on assets of approximately 1% during this period.
  • The bank's funding and liquidity remain significant credit strengths, with a high buffer of liquid assets and minimal reliance on market funds.
  • UOB's ratings are supported by a three-notch uplift based on Moody's assessment of a very high likelihood of public support from the Government of Singapore in times of need.

Statistics:

  • UOB's_Common Equity Tier 1 ratio was 15.4% as of March 2025.
  • Moody's expects the bank's return on assets to decline to approximately 1% during 2025-2026.
  • UOB's problem loan ratio is expected to remain between 1.5% and 2.5% through 2025-2026.
  • The bank's liquidity and funding are expected to remain very strong, with a high buffer of liquid assets and minimal reliance on market funds.

Sources:

  • Moody's Investors Service press release, dated [no date specified in the original text].
  • Moody's Ratings Methodology, "Banks", published in November 2024.
  • United Overseas Bank Limited annual report, 31 March 2025.