Thursday 12, October 2017 by Georgina Enzer

UNB records net profit of AED 1,369 million for the nine month period ended 30 September 2017

Union National Bank (UNB), one of the leading banks based in the United Arab Emirates, recorded a net profit of AED 1,369 million for the nine month period ended 30 September 2017, up by three per cent over same period of 2016.

The net profit for the third quarter of the year was AED 410 million, at the same level as in corresponding period of prior year.

Commenting on the results, Mohammad Nasr Abdeen, Chief Executive Officer, Union National Bank said “The UNB Group posted yet another quarter of sustained profitability on the back of strong balance sheet, increased business momentum in Consumer Banking and ongoing cost management. As the credit growth locally remains muted, the Group is managing its lending on selective basis and continues to diversify its revenue streams by growing the fee related business during the year”.

Mohammad Nasr Abdeen further added that “UNB became the first UAE Bank to open a branch in Shanghai, the People’s Republic of China to support our customers in the growing UAE – China trade corridor in line with our customer centric business strategy.”

The operating profit for the nine month period ended 30 September 2017 was AED 1,886 million, up by six per cent compared to the same period last year mainly due to an increase in operating income for nine month period ended 30 September 2017 by 7 per cent to AED 2,752 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 average loan book partly offset by a reduction in net interest margin on account of increase in funding cost in the nine month period ended 30 September 2017 over the corresponding period of 2016. The net interest margin was 2.60 per cent for the nine month period ended 30 September 2017 down by four basis points compared to the same period last year. The non-interest income was up by 18 per cent to AED 771 million in nine month period ended 30 September 2017 over the same period last year mainly due to an increase in fees and commission income driven by higher business volumes in Consumer Banking business and higher gain on dealing in foreign currencies and derivatives.

Balance sheet

Net loans and advances were AED 71.5 billion as at 30 September 2017, down by three per cent year-on-year and over previous year-end due to certain loan repayments and softer credit demand. The total assets of the Group were AED 104.6 billion as at 30 September 2017, up by 1 per cent as compared to previous year end and marginally down by one per cent year-on-year.

Customers’ deposits were marginally down by one per cent to AED 74.3 billion as at 30 September 2017, compared to the corresponding period in the previous year. The Group’s liquidity position remained comfortable with the liquid assets, including investments constituting 27.4 per cent of the total assets as at 30 September 2017. Other Liquidity measures also remained satisfactory with the loan to deposit ratio being 96.2 per cent as at 30 September 2017. The advances to stable resources ratio was circa 85 per cent as at 30 September 2017. Also, the Liquidity Coverage ratio and the Eligible Liquid Assets ratio were significantly above the required thresholds.

Operating expenses

The operating expenses for the nine month period ended 30 September 2017 were AED 866 million, an increase of 8 per cent compared to the same period of prior year. The current year cost includes an expense of AED 30 million as a contribution to Sandooq Al Watan, as UAE marks 2017 as the Year of Giving.

The cost to income ratio of the Group was 31.5 per cent for 9M-2017 (9M-2016: 31.0 per cent) continuing to be amongst the best in UAE banking industry.

Credit quality

During the nine month period ended 30 September 2017, the ratio of non-performing loans and advances to gross loans and advances was 4.2 per cent as at 30 September 2017 (30 September 2016: 3.7 per cent), as the UNB Group continues to proactively manages the credit risks. The overall loan loss coverage was 92.9 per cent as at 30 September 2017 (30 September 2016: 101.2 per cent).

In line with the Group’s prudent approach to managing credit risks, additional provisions were recognised during the third quarter. Resultantly, impairment charge on financial assets increased during the nine month period ended 30 September 2017 and was at AED 486 million (9M-2016: AED 390 million).      

Profitability measures and capital strength

The annualised return on average equity, excluding Tier 1 capital notes for the nine month period ended 30 September 2017 was 10.9 per cent (9M-2016: 11.0 per cent) and the annualised return on average assets of 1.8 per cent (9M-2016: 1.7 per cent). The earnings per share for the nine month period ended 30 September 2017 was AED 0.46 (9M-2016: AED 0.46).

The increase in regulatory capital base mainly due to the current period profit coupled with reduction in risk weighted assets led to further strengthening in the UNB’s Group capital position. The Basel II capital adequacy ratio for the UNB Group computed in accordance with the Central Bank of the UAE guidelines was 19.7 per cent as at 30 September 2017 (31 December 2016: 18.9 per cent) with the Tier I capital adequacy ratio being 18.5 per cent as at 30 September 2017 (31 December 2016: 17.8 per cent). These ratios continue to remain significantly above the respective regulatory thresholds.

 

  • Operating profit of AED 1,886 million increased by six per cent for the nine month period ended 30 September 2017 compared to the same period of prior year

 

  • Operating income increased by seven per cent on year on year basis to AED 2,752 million

 

  • Loans and advances as at 30 September 2017 of AED 71.5 billion, marginally lower compared to prior year-end due to loan repayments

 

  • Healthy liquidity position with loan to deposit ratio being below 100 per cent and advances to stable resources of around 85 per cent as at 30 September 2017

 

  • Well managed cost base with cost to income ratio of 31.5 per cent for the nine month period ended 30 September 2017

 

  • Asset quality reflects the Group’s prudent approach to managing risks; NPLs to gross loans ratio of 4.2 per cent and loan loss coverage of 92.9 per cent as at 30 September 2017

 

  • Strong capital position with overall and Tier 1 capital adequacy ratios of 19.7 per cent and 18.5 per cent respectively as at 30 September 2017

 

 

 

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