Dubai: Union National Bank (UNB) on Thursday reported net profit of Dh922 million for the first half of 2016, down 22 per cent year-on-year.
The profit for the second quarter of 2016 of Dh472 million was up by 5 per cent compared to the first quarter of 2016, but was down 17 per cent compared to Dh571 million net profit reported in the second quarter of 2015.
“Given the generally uncertain global economic outlook, the UNB Group maintained its strategy to selectively pursue growth focusing on good quality assets while managing the downside risks. The Group’s balance sheet continues to remain strong coupled with adequate liquidity and capital buffers, as the region continues to adjust to an environment of lower oil prices,” said Mohammad Nasr Abdeen, Chief Executive Officer of UNB.
The operating profit for the first half of the year was Dh1.15 billion, down by 17 per cent over the same period of prior year. The operating income for the first six months of the 2016 was lower by 12 per cent at Dh1.68 billion compared to the corresponding period of previous year.
Loans and advances were up by 4 per cent year-on-year to Dh70.1 billion as at June 30, 2016 and were up by 2 per cent compared to the prior year end. The bank’s investment portfolio increased by 19 per cent year-on-year to Dh18.5 billion as at 30 June 2016. The group’s consolidated total assets of Dh102.2 billion as at June 30, 2016, slightly lower compared to the corresponding period of 2015.
Customers’ deposits remained broadly unchanged at Dh73.3 billion as at 30 June 2016, compared to the corresponding period in the previous year.
The bank said its cautious approach through tighter underwriting standards and selective booking of quality assets led to a more moderate growth in loans and advances impacting revenues.
The tighter liquidity environment has led to a higher cost of deposits with the net interest income being adversely impacted by 15 per cent to Dh1.25 billion in the first half of 2016. As a result, the net interest margin has reduced by 52 bps to 2.64 per cent in the first half.
The group’s liquidity position remained strong at the end of the first half of the year with the liquid assets, including investments constituting 27.1 per cent of the total assets. Liquidity measures remained satisfactory with the loan to deposit ratio being 95.6 per cent and the advances to stable resources ratio at around 88 per cent at the end of the first half of the year.
During the first half, the ratio of non-performing loans and advances to gross loans and advances was relatively stable at 3.6 per cent compared to 3.5 per cent at the year-end 2015 with overall loan loss coverage at 102.4 per cent as at June 30 2016. The impairment charge on financial assets during the first half of 2016 was Dh198 million compared to Dh186 million in the same period last year.
UNB’s annualised return on average equity, excluding Tier 1 capital notes was 11.5 per cent with the annualised return on average assets of 1.8 per cent for the first half of the year. The group’s capital position has remained strong with the Basel II capital adequacy ratio at 19.2 per cent with the Tier I capital adequacy ratio of 18.1 per cent.
