Union National Bank reports lacklustre earnings for the last quarter of 2010 as it books a big increase in provisions.
Abu Dhabi's UNB bank posts Dh1.35bn earnings
Union National Bank's profits fell in the fourth quarter of 2009 as provisions for Dubai World and other bad debts weighed on earnings.
The bank's net profits for the fourth quarter of 2010 were Dh174m, a fall of 23.9 per cent on the same period in 2009. However, UNB booked robust profits for the year as a whole, with earnings rising 16.6 per cent to Dh1.35bn.
Mohammad Nasr Abdeen, UNB's chief executive, said: "During this extended period that has witnessed the vulnerability to the vagaries of the global economy where various economic indicators and business confidence have remained persistently muted, it is encouraging to note that the financial and business performance of the UNB Group has been satisfactory over the full economic cycle with the group continuing to grow in a measured manner in 2010."
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The bank booked credit impairment charges of Dh482.4m, an increase of 67.2 per cent. The figure included impairments for the troubled conglomerate Dubai World, and the Saad and Al Gosaibi Groups, two Saudi conglomerates which defaulted in 2009.
The bank stopped short of revealing its total exposure to any of these groups, saying only that non-performing loans accounted for 4.3 per cent of the bank's loan book.
Jaap Meijer, senior financial analyst at Alembic HC Securities, said that compared with expectations, the results were "pretty decent".
He said: "The loan losses were less than expected and non-performing loans are very well controlled. Exposure to Dubai World was less than expected."
Mr Meijer said that it was possible to calculate the bank's total exposure to Dubai World as Dh1.6bn. However, he added that the bank's exposure to Dubai Holding, which is still undisclosed, was weighing heavily on the bank's share price.
The bank's underlying operations showed some strength throughout the year, largely driven by an increase in fees.
Fees and commission income, which were the single most significant contributor to non-interest income, soared 25.9 per cent for the full year to Dh559.8m.
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Lending rose 11.4 per cent above 2009 levels to Dh56.5bn, but increased only slightly over the last three months, nudging 4.04 per cent upwards during that period.
However, that increase in lending saw net interest income rise 18.4 per cent to Dh1.95bn for the full year.
Deposits rose 13 per cent over the year to reach Dh57.9bn, the vast majority of which was seen in the last three months of 2010, when Dh5.1bn in new money was deposited.
UNB offers the highest Eibor rates for deposits in the country, second only to Abu Dhabi Commercial Bank, according to data from the Central Bank.