x Abu Dhabi, UAE Thursday 20 July 2017

UNB cuts provisions for bad loans

Union National Bank (UNB) has almost halved the amount of money it put aside to deal with defaulting loans, in a sign that the banking sector's problems with bad debts may be easing.

Union National Bank (UNB) has almost halved the amount of money it put aside to deal with defaulting loans, in a sign that the banking sector's problems with bad debts may be easing.

The first conventional bank in the UAE to report third-quarter earnings, UNB announced net profits yesterday of Dh462 million (US$125.7m), an increase of 28.5 per cent on the same quarter last year. The bank's provisions for non-performing loans were Dh68.1m, a 45 per cent decrease on the previous quarter.

Analysts said strong growth of deposits had left the bank in good shape, but cautioned that provisions for bad debts could increase in the coming months and drag down future earnings. Naveed Ahmed, a banking analyst at Global Investment House, said the bank had outperformed expectations and an increase in its share price would be likely to follow.

"The results were better than [we had] expected them to be because of provisions. We still need to see what will happen in the fourth quarter - we do expect provisions to go up," Mr Ahmed said. "We're pretty positive on this stock - it has been underperforming the market until now. We can see a potential rally." Jaap Meijer, a banking analyst at Alembic Equities, said the results were "well above what the consensus was looking for", with higher revenue and lower loan loss provisions than market estimates.

"We think it has quite a strong capital position and also liquidity is pretty decent. "We'd like them to disclose more of their exposure to Dubai Inc, but all in all we're quite happy." Mr Meijer said deposit growth of 4 per cent gave further cause for optimism. Mohammed Nasr Abdeen, the chief executive of UNB, said "prudent banking practices" had delivered robust performance throughout this year.

"While uncertainties and challenges remain in the global economic environment, we remain optimistic about the sustainability of the expected economic recovery and our ability to capitalise on those opportunities," he said.

The bank enjoyed the largest increase in net profits in its international and investment banking division, where it tripled profits to Dh170m. It also registered strong growth in its Islamic banking division, where net profits soared 135 per cent to Dh188m.

 

ghunter@thenational.ae