UNB reports Dh358 million third quarter profit

Abu Dhabi: Lower provisioning and balance sheet expansion have allowed Union National Bank (UNB) to post a 32 per cent increase in third quarter profit to Dh358 million compared with the second quarter.

The figure still falls 39 per cent short of profit recorded in the third quarter of 2008 due to gains the bank made last year on investment properties, as opposed to a loss this year.

After recording a 10 per cent fall in quarterly profit in the second quarter, UNB recovered with provisioning against non-performing loans (NPL) and loan losses reaching just Dh32 million, compared with Dh 136 million for the first half.

Despite the seemingly positive results, analysts remained conservative.

"While [UNB] third quarter results display crystallisation of revenue sources and a reduction in provisions for loan losses, perhaps indicating a slowdown in expected pace of NPL growth, we would wait to see if the indicators of future growth take hold," said Deepak Tolani, vice-president of equity research at Al Mal Capital.

As one of the largest banks in the UAE, UNB has also been one of the most conservative in lending.

Last quarter it announced it was not exposed to Saudi Arabia's troubled Saad Group while its exposure to the Algosaibi Group amounted to just Dh76 million.

The bank decreased its loan-to-deposit ratio last quarter to 94 per cent after deposits grew by 10.5 per cent and loans grew by two per cent over the second quarter.

That ratio stood at 97 per cent at the end of the first quarter and 102 per cent in December, 2008.

According to Central Bank figures, the loan to deposit ratio for the 52 banks in the country reached 104.5 per cent at the end of September, compared with 105.2 per cent in August.

The ratio is an indicator of a bank's health. Banks with ratios exceeding 100 per cent have to rely on borrowed funds to maintain lending activity.