Dubai: Union National Bank (UNB), the Abu Dhabi-based lender, reported on Wednesday nearly flat year-on-year growth in net profit for the first quarter of 2017 as credit growth remained muted.

The bank’s net profit reached Dh451.9 million in the first quarter of this year, inching up from the Dh450 million recorded in the same quarter of 2016.

“The liquidity situation in the market has improved during the first quarter of 2017 with gradually improving economic prospects. However, the credit growth remained muted as the operating environment continues to align with the new global and regional economic paradigm,” said Mohammad Abdeen, UNB’s chief executive officer.

He added in a statement that UNB will continue to “invest in areas of growth” and maintain strong capital levels while pursuing a prudent strategy.

The bank’s profits came above market expectations, which were of Dh443.6 million in first quarter net profit, according to three analysts polled by Reuters. UNB had reported a 15 per cent decline in net profit for the full year 2016.

Widely seen trend

During the first quarter of 2017, UNB’s impairment charges shot up to reach Dh169 million — up 99 per cent from the Dh85 million recorded in Q1 2016.

The jump in the first three months mirrors a trend widely seen across the UAE’s banks in 2016 of significantly higher impairments. It comes amid slower economic growth in the country that is leading to an increase in bad loans both from corporate and retail customers.

In its management analysis report posted to the Abu Dhabi bourse’s website, UNB said the ratio of non-performing loans increased in the first quarter to reach 3.6 per cent (compared to 3.4 per cent as of December 31, 2016).

“The increase in the impairment charge during the quarter is in keeping with the UNB Group’s policy to recognise provisions prudently,” the report said.

It added, “As part of the bank’s ongoing initiative to diversify its funding sources, an additional amount of $300 million (Dh1.1 billion) was raised as medium term funding during the quarter.”

Meanwhile, UNB’s loans and advances reached Dh73.5 billion at the end of the first quarter of the year, up 8 per cent year-on-year. Customer deposits also rose 5 per cent to reach Dh75.6 billion from Dh72.1 billion a year earlier.

The bank’s total assets reached Dh104.6 billion at the end of the first quarter, up 5 per cent year-on-year.