http://www.businesstimes.com.sg/arch...-npls-20140801

Published August 01, 2014

Bad home loans flow through to UOB NPLs

Bank cites some buyers of high-end properties

By Siow Li Sen

[email protected] @SiowLiSenBT


[SINGAPORE] United Overseas Bank's non-performing loans (NPL) surged in the second quarter as payments by some high-end property buyers deteriorated.

Industry observers believe the situation could worsen as they do not expect significant improvement in the sluggish residential market over the next 12 months.

UOB said yesterday that NPL rose 11.2 per cent or S$232 million over the previous quarter to S$2.31 billion, and was up 7.3 per cent over a year ago.

But the NPL ratio was stable at 1.2 per cent in 2Q14, (1.1 per cent in Q1, 2014 and 1.2 per cent in Q2, 2013) as total loans rose to S$193 billion, up 11.7 per cent year-on-year and 2.4 per cent on quarter. The increase in NPLs was due to Singapore housing loans limited to a few accounts, and loans in Thailand and Indonesia, said Wee Ee Cheong, UOB chief executive at the bank's Q2 results briefing.

"These are isolated cases, it involved a group of borrowers," he said, referring to the housing loan NPLs.

The borrowers were buyers of high-end investment properties and the bank saw "weakness in payments", he said.

There is no systemic weakness in the bank's housing loan book, the "portfolio is well secured," he said.

"The values have not collapsed, the bank is studying if there is more to it," said Lee Wai Fai, UOB chief financial officer.

Mr Lee said the Singapore housing loan NPL is S$80 million. As at end-June, group housing loans NPLs totalled S$447 million, up from S$311 million at end-December last year and S$302 million at end-June last year.

Prices of Singapore private residential property has been sliding as measures to rein in home loans continue to bite.

The URA's private home price index fell one per cent in Q2, after easing 1.3 per cent in Q1. This is the third straight quarterly drop.

Year on year, the Q2 index was down 2.8 per cent.

"I think the (housing loan) NPL is not going to go away," said SLP International executive director Nicholas Mak.

Mr Mak does not expect the government to relax cooling measures for at least six months.

"The high end segment has taken quite a beating in the last four years - demand and prices have softened, (while) the weakness has been felt really in the last two years," he said.

Last week, the Monetary Authority of Singapore said it is too early to ease property cooling measures as prices remain high.

Risk factors have not changed, MAS managing director Ravi Menon said at the MAS annual report 2013/2014 press conference.

Property prices remain at elevated levels although they have started to soften, he said.

Prices went up 60 per cent over the last four years but have declined by just 3.3 per cent over the last three quarters, he added.

But Mr Mak does not see bad debt from mortgages to be a big problem for the banks.

"All the local banks have experience in dealing with this after the Asian financial crisis; they'll talk to the borrowers to restructure the loans or ask them to sell off the properties to pay off the loans," he said.

If the delinquent debt leads to mortgagee sales, there are people out there with money waiting to snap up properties if they are priced very low, he said.

Mr Wee said new home loan sales continue to slide, they are down 25-30 per cent.

Mr Lee said "mathematically" mortgages may turn negative next year, though internally the bank is "not projecting it yet."

The Thai and Indonesian NPLs were due to cash flow challenges facing start-ups, said Mr Lee.

"They are still in operations," he said.

"There are no issues with the bank's broader loan portfolio in these countries; we are confident of restructuring these loans," he said.