Tuesday, Apr 24, 2012

Gulf News

Dubai: Union National Bank (UNB) reported a 3.3 per cent increase in net profits to Dh474.8 million for the first quarter of 2012, up from Dh459.8 million in the corresponding quarter in 2011.

Liquid assets represented 21.5 per cent of the total assets as of March 31. The banks loan to deposit ratio improved to 91.6 per cent. Total assets increased to Dh86.1 billion compared to Dh82.5 billion on December 31. Customers deposits reached Dh63.4 billion, up from Dh60.3 billion on Dec-ember 31.

UNBs operating profit increased 12.2 per cent to Dh596.9 million, up from Dh532.1 million in the same quarter last year.

The increase in operating profit was driven by growth in operating income as the bank continued to invest in the business for future growth.

The continuing focus on credit quality led to a measured increase in loans and advances to Dh58.1 billion as of March 31 compared to Dh57.6 billion at the previous year-end.

The challenging market conditions require the group to proactively monitor and manage asset quality which remains one of the key areas for management focus and attention, the bank said in a statement.

The ratio of non-performing loans to gross loans and advances was 4.1 per cent with the loan loss coverage being 70.6 per cent.

The impairment charge on financial assets for the quarter was Dh116.5 million, as the impairment charge for the first quarter of last year was positively impacted by recovery of a previously written-off loan.

The results beat analysts expectations.

Beating expectations

Naveed Ahmad, senior financial analyst at Global Investment House, said: UNB came up with a good set of results for the first quarter of 2012, beating our expectations by 11 per cent.

Albeit the bottom line remained largely unmoved from first quarter 2011 levels, improvement from the previous quarter was remarkable [growth of over two times]. Bottom line was kept afloat by net interest income which exhibited substantial growth year on year, however the banks top-line has started to exhibit weakness on a quarterly basis.

The general provisions constituted 1.07 per cent of the total credit risk weighted assets as of March 31 compared to the UAE Central Bank requirement of 1.5 per cent of the credit risk weighted assets by December 31, 2014.

With deposit growth outpacing loans, pressure on the top-line is expected to ensue. Value added by the top-line during the quarter was offset by a rise in provisions and a drop in non-interest income; the former rising on account of further NPL formation and the latter driven by the impact of retail regulation on the banks fee income generation capability. NPLs saw an augmentation of around Dh270 million during the quarter or 40bps [basis points] to the NPL ratio.

Provisions seem to emanate from both the corporate and retail segments equally and we believe that these were largely [maybe almost wholly] specific in nature. We have little reason to alter our full year expectations, for now, Ahmad said.

Fitch Ratings recently affirmed UNBs Long-term Issuer Default Rating at A+ with Stable Outlook.

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