Union National Bank (UNB), one of the leading banks based in the United Arab Emirates, recorded a consolidated profit of Dhs474.8m for the first quarter of 2012 (Q1-2011: Dhs459.8m), an increase of 3.3% compared to the corresponding figure of the previous year.
Mohammad Nasr Abdeen, Chief Executive Officer, Union National Bank said “The first quarter results of the UNB Group are a testimony to the consistent and sustainable performance that the UNB Group has been posting over the last many years. Notwithstanding the ongoing uncertain global economic environment, the strategic focus on the core businesses has ensured that the UNB Group continues to provide acceptable returns to the shareholders over the longer term”. He further added that “The very comfortable liquidity and the solid capital adequacy position would enable the Group to support lending activity as the economic recovery gathers momentum in 2012 and beyond”.
The operating profit for the first quarter of the year was Dhs596.9m (Q1-2011: Dhs532.1m), an increase of 12.2% compared to that for the prior period. The increase in operating profit was driven by a growth in the operating income whilst continuing to invest in the business for future growth. The operating income for the three month period ended 31 March 2012 of Dhs781.7m (Q1-2011: Dhs704.6m) was up by 10.9% compared to that for the prior period led by an increase in net interest income and net income from Islamic financing which rose to Dhs618.2m (Q1-2011: Dhs532.2m) an increase of 16.2% over the prior period. The increase in net interest income and net income from Islamic financing was principally due to the higher net interest margin and growth in the earning assets. The noninterest income decreased by 5.2% to Dhs163.4m in the first quarter (Q1-2011: Dhs172.4m), mainly on account of lower net fee and commission income due to the implementation of the Central Bank of the UAE regulations on lending to individual customers that were introduced last year effective from 1 May 2011.
The continuing focus on credit quality, led to a measured increase in loans and advances to Dhs58.1bn as at 31 March 2012 compared to the previous year-end (31 December 2011: Dhs57.6bn), albeit it was 3.2% higher than the corresponding figure for the prior period. The customers’ deposits reached Dhs63.4bn as at 31 March 2012 (31 December 2011: Dhs60.3bn), an increase of 5.1% compared to the previous year-end and increasing by 6.4% compared to the prior period. The Group continued to have a very comfortable liquidity position with liquid assets constituting 21.5% of the total assets as at 31 March 2012 (31 December 2011: 19.8%). The loan to deposit ratio improved to 91.6% as at 31 March 2012 (31 December 2011: 95.5%). The total assets of the Group increased to Dhs86.1bn as at 31 March 2012 (31 December 2011: Dhs82.5bn).
The Group continues to invest in the business for sustainable future growth which led to operating expenses for three month period ended 31 March 2012 of Dhs184.8m (Q1- 2011: Dhs172.5m), an increase of 7.1% compared to the prior period. The efficiency ratio (cost to income) further improved to 23.6% in the first quarter (Q1-2011: 24.5%) and reflects the Group’s prudent cost management. 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 ratio of non-performing loans to gross loans and advances was 4.1% as at 31 March 2012 (31 December 2011: 3.7%) with the loan loss coverage being 70.6% as at 31 March 2012 (31 December 2011: 74.7%). The impairment charge on financial assets for the quarter stood at Dhs116.5m (Q1-2011: Dhs69.9m), as the impairment charge for the first quarter of last year was positively impacted by recovery of a previously written off loan. The general provisions constituted 1.07% of the total credit risk weighted assets as at 31 March 2012 (31 December 2011: 1.07%), as compared to the Central Bank of the UAE requirement of 1.5% of the credit risk weighted assets by 31 December 2014.
The annualized return on average equity, excluding the Tier 1 capital notes, for first quarter of 2012 was 17.2% (Q1-2011: 18.5%) with the annualized return on average assets being 2.3% (Q1- 2011: 2.2%). The overall Basel II capital adequacy ratio, after adjusting for the cash dividend for fiscal 2011, computed in accordance with the Central Bank of the UAE guidelines was 21.8% as at 31 March 2012 (31 December 2011: 21.9%).
Fitch Ratings has recently affirmed UNB’s Long-term Issuer Default Rating at ‘A+’ with Stable Outlook. The Bank has consistent ratings from all the ratings agencies [additionally Moody’s and Capital Intelligence rate the Bank] with Stable Outlook.
Awards and recognition Recently, UNB was awarded the distinguished Golden Award for quality from the Arab Administrative Development Organization member of the Arab League and Tatweej Academy for excellence and Quality in the Arab World. UNB also won two awards at the Banker Middle East Product Awards 2012, the first being Best Savings Product for the UNB Smart Account Product and the second for Best SME Product for the UNB Medic Loan. Some of the other notable international awards that UNB won include:
– The prestigious International Socrates Award for the “Best Enterprise” from the Europe Business Assembly in the United Kingdom.
– The “European Award for Best Practices 2012 in the Gold Category” from the European Society for Quality Research at an Award ceremony held in Amsterdam, Netherlands.