Business | Banking

UNB’s second quarter net up 9.7%

Bank’s first half profit up 6.3% year-on-year to Dh934.4m

  • By Himendra Mohan Kumar, Staff Reporter
  • Published: 17:52 July 31, 2012
  • Gulf News

Abu Dhabi: Union National Bank (UNB) said yesterday its fiscal second quarter net profit rose 9.7 per cent on year to Dh459.6 million while profit for the first half of the year rose 6.3 per cent year-on-year to Dh934.4 million.

The impairment charge on financial assets for the first half of 2012 was Dh236.6 million, up 7.1 per cent on year, UNB said in a statement. The general provisions constituted 1.10 per cent of the total credit risk weighted assets as of June 30, mainly due to a reduction in the credit, it added.

Commenting on the financial performance of the UNB Group, the bank’s Chief Executive Officer Mohammad Nasr Abdeen said:“The results for the second quarter and first half of the year have continued to show a consistent improvement over the corresponding period last year, underscoring the considerable strength of the bank’s franchise and business model. The Group’s financial position remains strong as is evident from the various key performance metrics.”

Analysing UNB’s financial performance, Shabbir Malek, EFG-Hermes Emirates’ banking analyst told Gulf News: “UNB’s net profit rose 9.7 per cent year-on-year due to lower provisions and beat our Dh398 million estimate. UNB’s loan growth continues to be sluggish as the bank’s loans rose a modest 1.9 per cent, year-on-year.”

He added: “Credit quality indicators deteriorated with the NPL ratio rising to 4.9 per cent from 4.1 per cent in the first quarter of 2012. We believe that although earnings were better than expected the increase in NPL ratio is a concern. UNB’s valuations however are attractive in context of its profitability and they adequately factor in the bank’s credit quality risks. We have a Buy rating on the stock with a Fair Value of Dh4.50.

UNB’s stock rose 0.68 per cent to Dh2.96 in yesterday’s trading on the Abu Dhabi Securities Exchange.

The operating profit for the first six months of the year was Dh1,183.0 million, an increase of 7.0 per cent compared to the year-ago period. The operating income for the six month period ended June 30 of Dh 1,561.5 million was up by 7.1 per cent, year-on-year primarily due to an increase in net interest income and net income from Islamic financing which rose to Dh1,243.7 million from Dh1,127.7 million in the corresponding period a year earlier, UNB said.

“Sharp liquidity management in conjunction with a reduction in cost of deposits led to an improved net interest margin in the first half of over 3.0 per cent. This along with a higher average interest earning assets led to an increase in the net interest income and income from Islamic financing. The non-interest income decreased by 3.7 per cent to Dh317.8 million in the first half of the year principally due to a drop in the fee and commission income which fell to Dh227.2 million,” the bank added.

However, UNB said this drop in the fee and commission income was partly offset by gains on dealing in foreign currencies and trading and non-trading financial instruments which together increased by 136.7 per cent in the first half of the year to Dh60.6 million. The loans and advances of Dh57.3 billion as at 30 June 2012 was up by 1.9 per cent on year. The customers’ deposits reached Dh60.0 billion as of June 30, up 2.6 per cent, year-on-year.

“The (UNB) Group continued to maintain comfortable liquidity position with liquid assets constituting 19.4 per cent of the total assets as at 30 June 2012,” the bank said, adding it reported a 7.4 per cent increase on year in operating expenses in the six month period ended June 30.

UNB also said it is scheduled to expand its geographical presence to five countries from its existing presence in the UAE, Qatar, Egypt and China with the opening of its branch in Kuwait in the third quarter this year.

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