UOB's mortgage growth rate feared to collapse to 5% in 2014

Even group loan growth could slow.

According to Nomura, the jump in bond yields should affect UOB the least among the three Singapore banks. It has the lowest proportion of assets held in bonds (~12%).

It also appears to have been actively lowering the duration on its portfolio, as evident by the sharp reduction in the average yield on its investment securities.

Here's more from Nomura:

Thus, we believe, it is well-positioned to capture the yield upcycle through capitalising on gapping opportunities. UOB is also conservative on loan provisioning, having built up a significant general provision reserve that is above industry average.

Hence, we think, UOB has relatively higher capacity to absorb any sudden increases in NPL formation.

We forecast a loan CAGR of 10% over the next three years. However, in a worst-case scenario where mortgage growth rates collapse to 5% next year from the current growth rate of 15%, group loan growth could slow to 7.5%, we estimate.

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