Here's what compressed UOB's NPL ratio in Q4

But higher NPL ratio is expected by end-2017.

Luck may have been UOB's way in the past quarter, as its nonperforming loan ratio marginally dipped to 1.5% in 4Q16, from 1.6% in the previous quarter due to higher write-offs.

However, RHB noted that it sees UOB's NPL ratio increasing in the future, growing 1.7% by end-2017 due to the soft economic environment.

RHB stated that one upside UOB can expect this year is the widening of the net interest margin and the stronger non-interest income.

"4Q16’s NIM of 1.69% was unchanged QoQ, but was 10bps narrower YoY. We forecast 2017 NIM of 1.76%, up from 2016’s 1.71%, on the back of a higher Singapore Interbank Offered Rate (SIBOR) from Fed rate hikes," RHB explained.

It furthered, "Its 2016 non-interest income fell 1.6%. This was mainly due to trading and investment income falling 8.1% due to lower gains from the sale of investment securities, but partially offset by higher trading income. We have factored in stronger 2017 non-interest income from the lower 2016 base."

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