x Abu Dhabi, UAESaturday 20 January 2018

Mixed results for local banks

Abu Dhabi Islamic Bank and Union National Bank see profits for the full year rise, but provisions remain a drag on earnings at UNB.

Profit at Union National Bank (UNB) fell in the fourth quarter of last year as provisions for bad debts weighed on earnings.

Abu Dhabi Islamic Bank (ADIB), a smaller lender, returned to profit as its problems with defaulting debtors started to ease.

UNB's net profit for the fourth quarter of last year was Dh174 million (US$47.37m), a fall of 23.9 per cent compared with the same period in 2009. But it booked robust profits for the year, with earnings rising 16.6 per cent to Dh1.35 billion compared with 2009.

ADIBreturned to profit for the fourth quarter of last year, with profits of Dh114.1m compared with a loss of Dh623.3m the year before.

The Sharia-compliant lender booked a 48.3 per cent fall in credit provisions and impairment charges to Dh749m, which it attributed to its pre-emptive provisioning when the global economic crisis began.

"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," said Mohammad Nasr Abdeen, the UNB chief executive.

UNB booked impairment charges of Dh482.4m, a rise of 67.2 per cent, including impairments for Dubai World and Saad and Al Gosaibi groups, two Saudi conglomerates that defaulted in 2009.

The bank stopped short of revealing its total exposure to those groups, saying only that non-performing loans accounted for 4.3 per cent of the bank's loan book.

Jaap Meijer, a financial analyst at Alembic HC Securities, said compared with expectations, UNB's results were "pretty decent". "The loan losses were less than expected and non-performing loans are very well controlled. Exposure to Dubai World was less than expected," he added.

Mr Meijer said it was possible to calculate the bank's total exposure to Dubai World as Dh1.6bn. But he added the bank's exposure to Dubai Holding, which is still undisclosed, was weighing heavily on it share price.