Monday 17, July 2017 by Jessica Combes

UNB posts profit of AED 958 million for H1 2017, up four per cent

 

Union National Bank (UNB) has recorded a profit of AED 958 million for the first half of 2017, up four per cent over the same period of 2016.

The profit for Q2 2017 of AED 506 million was up by 12 per cent compare to the first quarter.

“Whilst continuing with our approach to be selective in booking new business, the UNB Group has continued to post consistent results, with the first half year results recording an increase in both the operating income as well as the bottom line. This growth was underpinned by higher business volumes, prudent risk management, and sound cost management. The Group’s already strong capital position improved further adding to the Group’s financial strengths and its solid credit ratings,” said Mohammad Nasr Abdeen, Chief Executive Officer, Union National Bank.

The operating profit for the first half of 2017 was AED 1,238 million up by seven per cent compared to the same period last year mainly due to an increase in operating income by eight per cent to AED1,819 million. The growth in operating income was driven by an increase in both net interest income and non-interest income. The increase in net interest income was led by growth in the loan book partly offset by a reduction in net interest margin on account increase in funding cost in H1-2017 over the corresponding period of 2016.

The net interest margin was 2.58 per cent for H1-2017 in line with the trend seen in the first quarter of the year. The non-interest income was up by 22 per cent to AED 514 million in H1-2017 over the same period last year mainly due to an increase in fees and commission income driven by higher business volumes and higher gain on dealing in foreign currencies in foreign currencies and derivatives.

Net loans and advances were up by three per cent year-on-year to AED 72 billion as at 30 June 2017. However, compared to the previous year end there was a slight reduction in the net loans and advances as the Group saw certain prepayments and demand for new credit remained soft. The total assets of the Group were broadly unchanged at AED 102.6 billion as at 30 June 2017.

Customers’ deposits were marginally down by one per cent to AED 72.9 billion as at 30 June 2017, compared to the corresponding period of 2016. The Group’s liquidity position remained comfortable with the liquid assets, including investments constituting 25.6 per cent of the total assets as at 30 June 2017. Liquidity measures remained satisfactory with the loan to deposit ratio being 98.7 per cent as at 30 June 2017. The advance to stable resources ratio was circa 84 per cent as at the half-year end. Also the liquidity coverage ratio and the eligible Liquid Assets ratio were slightly above the required thresholds.

The operating expenses for the first half of 2017 were AED 582 million, an increase of 11 per cent compared to the same period the prior year. This increase was mainly due to the contribution of AED 30 million made by the Bank in the second quarter to Sandooq Al Watan to support its objectives in 2017’s Year of Giving. The cost to income ratio of the Group increased from 31.1 per cent in H1-2016 to 32 per cent.

In line with the Group’s policy of managing credit risk prudently, certain provisions were recognised in H1. The impairment charge for H1-2017 was AED 258 million, higher by 30 per cent compared to H1-2016. The ratio of non-performing loans and advances to gross loans and advances was 3.9 per cent as at 30 June 2017 with loan loss coverage being 95.8 per cent.

The annualised return on average equity, excluding Tier 1 capital notes for the first half of 2017 at 11.6 per cent, up from 11.5 per cent from the same period the preceding year and the annualised return on average assets of 1.9 per cent, up from 1.8 per cent in 2016, were broadly consistent with the similar metrics for the same period in 2016. The earning per share for the first half was AED 0.33, vs AED 0.32 in 2016.

The increase in the regulatory capital base mainly due to the current period profit coupled with reduction in risk weighted assets led to further strengthening of the Group’s capital position. The Basell II capital adequacy ratio for the UNB Group computed in accordance with the Central Bank of the UAE guidelines was 19.8 per cent as at 30 June 2017, and at 18.9 per cent at 31 December 2016) with the Tier 1 capital adequacy ratio being 18.6 per cent as at 30 June 2017, and at 17.8 per cent at 31 December 2016. Both ratios remained above the respective thresholds set by the Central Bank of the UAE.

During the first half of the year, Fitch Ratings, Moody’s Investor Service, and Capital Intelligence affirmed the ratings of the Bank with a stable outlook.

  

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