UNB announces net profit of AED 1,657 million for 2017
Union National Bank (UNB), one of the leading banks based in the United Arab Emirates, recorded a net profit of AED 1,657 million for the year 2017, up by five per cent compared to the prior year. The net profit for the fourth quarter of the year was AED 289 million, higher by 15 per cent as compared to the same quarter of 2016.
The UNB Group has recorded another year of satisfactory financial performance as the global economic outlook continues to improve. The Group’s focus has been to further expand its franchise, selectively pursue growth with emphasis on fee related business and prudent risk management, according to Mohammad Nasr Abdeen, Chief Executive Officer.
“The Group expanded its presence both domestically and internationally, with the opening of new branches in the UAE and Egypt as also establishing a commercial branch in the People’s Republic of China, the first ever from a UAE based bank,” he added.
The operating profit for the year ended 31 December 2017 was AED 2,496 million, up by six per cent compared to the preceding year mainly due to an increase in operating income for the year 2017, an increase of four per cent to AED 3,631 million.
The growth in operating income was driven by an increase in non-interest income while net interest income increased modestly by one per cent. The increase in net interest income was led by a growth in the average loan book partly offset by a reduction in net interest margin on account of increase in funding cost; the net interest margin for 2017 was 2.57 per cent, lower by eight basis points compared to the last year. The non-interest income in 2017 increased by 15 per cent, to AED 984 million, over the last year mainly due to an increase in fees and commission income driven by higher business volumes in Retail Banking business and gain on dealing in foreign currencies and derivatives. This increase was partially offset by recognition of a fair value loss on investment properties of AED 27 million in 2017.
Net loans and advances were AED 71.1 billion as at 31 December 2017, lower by four per cent year-on-year due to certain loan repayments in wholesale banking segment and overall softer credit demand. As part of active balance sheet management, the investment portfolio of the Group increased by 34 per cent in 2017 to AED 21.1 billion as at 31 December 2017. The total assets of the Group were AED 107.5 billion as at 31 December 2017, higher by 3 per cent as compared to previous year end.
Customers’ deposits increased by two per cent to AED 78.7 billion as at 31 December 2017 compared to the previous year-end. The liquidity position of the Group remained strong with the liquid assets, including investments constituting 29.8 per cent of the total assets as at 31 December 2017. Other key Liquidity measures remained sound with the loan to deposit ratio being 90.4 per cent and the advances to stable resources ratio being circa 80 per cent as at 31 December 2017. Also, the Liquidity Coverage ratio and the Eligible Liquid Assets ratio were significantly above the required thresholds set by the Central Bank of the UAE.
Consistent with the prior year trends, the Group continued to efficiently manage its cost base with the operating expenses for 2017 at AED 1,135 million being broadly unchanged as compared to the prior year. As a socially responsible corporate entity, the Group made a contribution of AED 30 million in 2017 to Sandooq Al Watan, as UAE marked 2017 as the Year of Giving.
The cost to income ratio of the Group for 2017 was 31.3 per cent (2016: 32.5 per cent) continuing to be amongst the best in UAE banking industry.
The Group has been prudently managing its asset quality, proactively identifying problem loans and taking necessary measures to protect the interests of the Group. The ratio of non-performing loans and advances to gross loans and advances was 4.3 per cent as at 31 December 2017 (31 December 2016: 3.4 per cent) due to an increase in the impaired portfolio in certain segments. The overall loan loss coverage was 97.1 per cent as at 31 December 2017 (31 December 2016: 108.3 per cent).
Additional provisions of AED 308 million were recognised during the fourth quarter, resulting in an overall impairment charge on financial assets during 2017 of AED 794 million (2016: AED 702 million).
The annualised return on average equity, excluding Tier 1 capital notes, for the year ended 31 December 2017 was 9.8 per cent (2016: 9.9 per cent) and the annualised return on average assets was 1.6 per cent (2016: 1.5 per cent). The earnings per share for the year ended 31 December 2017 was AED 0.57 (2016: AED 0.55).
The increase in the regulatory capital base, along with a reduction in risk weighted assets led to further strengthening in the Group’s already solid capital position. The Basel III capital adequacy ratio for the UNB Group computed in accordance with the Central Bank of the UAE guidelines was 19.4 per cent as at 31 December 2017 with the Tier I capital adequacy ratio being 18.3 per cent as at 31 December 2017. The Group is well prepared for the adoption of IFRS 9: Financial Instruments standard that would be implemented effective 1 January 2018.
The Board of Directors has recommended a dividend distribution of 20 per cent (AED 0.20 per share) of cash dividend subject to necessary approvals.