Dubai: Union National Bank (UNB) reported a profit of Dh450 million for the first quarter of 2016, down 27 per cent compared to Dh615 million in the first quarter of 2015.
“2016 witnessed a soft start to the year as global economic activity moderates and the operating environment continues to readjust at the back of a decline in oil prices. The local banking sector is facing headwinds, which also saw some impact on the group’s profitability,” said Mohammad Nasr Abdeen, Chief Executive Officer, UNB.
The operating profit for the first quarter of the year was Dh551 million, a decrease of 19 per cent over the same period of prior year. The operating income for the three month period ended 31 March 2016 was down by 13 per cent to Dh813 million compared to the corresponding period of previous year.
Increased cost of deposits resulted in bank’s net interest income decline 12 per cent to Dh623 million in the first quarter of 2016, with the net interest margin being impacted by 50 basis points to 2.63 per cent. The selective approach in booking new assets led to a drop in net fee and commission income, which along with lower net gains from dealing in foreign currencies and derivatives resulted in lower non-interest income, the bank said in a statement.
Loans and advances were up by 2 per cent year-on-year to Dh68.3 billion as at 31 March 2016. The investment portfolio increased by 6 per cent year-on-year to Dh15.3 billion as at the close of the first quarter of this year. The total assets of the group registered a growth of 2 per cent to Dh99.8 billion year on year.
Customers’ deposits were at Dh72.1 billion as at 31 March 2016, registering an increase of 3 per cent compared to the corresponding period in 2015. The group’s liquidity position remains comfortable with the liquid assets, including investments constituting 27 per cent of the total assets as at 31 March 2016. The loan to deposit ratio was 94.7 per cent at the close of the quarter and the advances to stable resources ratio at around 85 per cent.
The operating expenses in the first quarter were Dh262 million, slightly up by 4 per cent over the same period of 2015. The cost income ratio of the group for the first quarter was at 32.2 per cent.
During the first quarter, the ratio of non-performing loans and advances to gross loans and advances up-ticked to 3.7 per cent as at 31 March 2016 compared to 3.5 per cent at year-end 2015 with overall loan loss coverage at 102.7 per cent at the close of the first quarter. The impairment charge on financial assets during the first quarter of 2016 was Dh85 million compared to Dh57 million in the first quarter of last year.
Capital adequacy ratio remained strong at 18.9 per cent as at 31 March 2016 compared to 19.4 per cent at year-end 2015 with the Tier I capital adequacy ratio of 17.8 per cent as at 31 March 2016. “While maintaining a prudent strategy we continue to maintain strong capital levels and adequate liquidity,” said Abdeen.
