Union National Bank announces profit for the year’s first nine month period

 

Union National Bank announces profit for the nine month period ended 30 September 2012 of AED 1,467 million up by 6.6% compared to prior period

 

  • Operating profit for the nine month period ended 30 September 2012 increased by 7.2% over prior period to reach AED 1,808 million

 

  • Loans and advances of AED 56.6 billion as at 30 September 2012, up by 1.6% year-on-year

 

  • Customers’ deposits of AED 55.3 billion as at 30 September 2012, up by 5.2% year-on-year 

 

  • Optimized liquidity position with loan to deposit ratio of 102.5%, liquid assets to total assets of 16.6% and advances to stable resources of well below 100% as at 30 September 2012

 

  • Cost to income ratio of 24.0%, among the lowest in the local banking sector

 

  • Solid capital adequacy ratio of 24.4% as at 30 September 2012

 

Financial highlights

All figures are in AED Million

 

30-Sep-12

30-Sep-11

Variance %

Total assets

78,018

76,882

1.5%

Loans and advances

56,642

55,735

1.6%

Customers’ deposits

55,263

52,511

5.2%

Equity attributable to equity holders of the Bank

13,855

12,794

8.3%

Operating profit for the period

1,808

1,688

7.2%

Profit for the period

1,467

1,375

6.6%

Key Financial Indicators for the nine month period ended 30 September 2012 and 30 September 2011:

 

   

YTD Sep-2012        

YTD Sep-2011

Return on Average Equity (ROAE)*

17.0%

17.7%

Return on Average Assets (ROAA)*

2.4%

2.3%

Earnings per Share

AED 0.53

AED 0.50

Cost / Income ratio

24.0%

24.0%

* – Annualized

Financial Review

Union National Bank (UNB), one of the leading banks based in the United Arab Emirates, reported a profit of AED 1,467 million for the nine month period ended 30 September 2012 (nine month period ended 30 September 2011: AED 1,375 million), up by 6.6% compared to the previous period. The profit for the third quarter of 2012 rose sequentially to AED 532 million (Q3-2011: AED 497 million) and increased by 7.1% compared to the corresponding period of 2011.

Commenting on the results, Mr. Mohammad Nasr Abdeen, Chief Executive Officer, Union National Bank said “The continued focus on the core lines of businesses has led to a steady growth in profits and further strengthening of the strong financial position of the UNB Group”. Mr. Abdeen added that “it was truly gratifying that the Bank’s commitment to attain and sustain high standards of Quality in all our endeavours had been recognized with the Bank recently being awarded the Sheikh Khalifa Excellence Award –  Diamond Category 2012, becoming the first ever Bank to receive such a prestigious award”.

The operating income and operating profit both maintained a steady uptrend. The operating profit for the nine month period ended 30 September 2012 grew by 7.2% over prior period to reach AED 1,808 million (nine month period ended 30 September 2011: AED 1,688 million). Similarly, the operating income for the nine month period ended 30 September 2012 grew by 7.1% over prior period to record AED 2,379 million (nine month period ended 30 September 2011: AED 2,221 million). The increase in operating income was due to an increase in net interest income and net income from Islamic financing which rose to AED 1,902 million (nine month period ended 30 September 2011: AED 1,767 million), up by 7.6% over the prior period and an increase in non-interest income which rose to AED 478 million (nine month period ended 30 September 2011: AED 454 million), up by 5.2% over the prior period. The basic and diluted earnings per share for the nine month period ended 30 September 2012 was AED 0.53 (nine month period ended 30 September 2011: AED 0.50)

The increase in net interest income was principally due to an active management of the funding costs and optimization of liquidity levels, whilst ensuring that the Group carried sufficient liquidity buffers. The higher non-interest income was mainly due to an increase in income from dealing in foreign currencies and trading and non-trading financial instruments which cumulatively increased by 286.2% in the nine month period ended 30 September 2012 to AED 114 million (nine month period ended 30 September 2011: AED 30 million). However, for the period under discussion the fee and commission income reduced to AED 325 million (nine month period ended 30 September 2011: AED 364 million) which was mainly due to the implementation in 2011 of the Central Bank of the UAE guidelines on lending to individuals.

Compared to prior period the loans and advances of AED 56.6 billion as at 30 September 2012 were up by 1.6%. However, compared to 2011 year-end there was a nominal decline in the loans and advances as the Group maintained its prudent lending approach. The customers’ deposits reached AED 55.3 billion as at 30 September 2012, up by 5.2% compared to the prior period. The decline in customers’ deposits compared to 2011 year-end was mediated to achieve a balance between profitability and liquidity needs of the Group. The loan to deposit ratio was 102.5% as at 30 September 2012, compared to 106.1% as at 30 September 2011 and 95.5% as at 31 December 2011, albeit liquidity buffers remained adequate with both liquid assets to total assets ratio and the UAE Central Bank mandated advances to stable resources ratio indicating adequate  liquidity. The total assets of the Group as at 30 September 2012 were AED 78.0 billion, up by 1.5% year-on-year.

In keeping with the Group’s strategy to invest prudently for sustainable future growth, investments in the areas of infrastructure, technology and human capital led to operating expenses increasing by 6.9% in the nine month period ended 30 September 2012 to AED 571 million (nine month period ended 30 September 2011: AED 534 million). The cost to income ratio at 24.0% for the nine month period ended 30 September 2012 (nine month period ended 30 September 2011: 24.0%) is among the best in the UAE banking sector.

The ratio of non-performing loans and advances to gross loans and advances was 4.7% as at 30 September 2012 (31 December 2011: 3.7%), a slight improvement compared to that as at the preceding quarter end. The loan loss coverage was 68.1% as at 30 September 2012 (31 December 2011: 74.7%). The impairment charge on financial assets, comprising mainly of the specific provisions taken in the nine month period ended 30 September 2012 was AED 323 million (nine month period ended 2011: AED 302 million), up by 6.8% compared to prior period. The general provisions constituted 1.14% of the total credit risk weighted assets as at 30 September 2012 (31 December 2011: 1.07%).

The annualized return on average equity, excluding the Tier 1 capital notes, for nine month period ended 30 September 2012 was 17.0% (nine month period ended 30 September 2011: 17.7%) with the annualized return on average assets for the nine month period ended 30 September 2012 being 2.4% (nine month period ended 30 September 2011: 2.3%). Capital adequacy continued to remain strong with overall Basel II capital adequacy ratio being 24.4% as at 30 September 2012 (31 December 2011: 21.9%), further buttressed by the current period profit.

Ratings

In 2012, Fitch Ratings had affirmed UNB’s Long-term Issuer Default Rating at ‘A+’ with Stable Outlook. Also, during the year Capital Intelligence had assigned ‘A+’ rating for the Financial Strength of the Bank with Stable Outlook.

Awards and recognition

UNB’s commitment to Service Quality and Excellence has been recognized consistently by leading industry bodies both locally and internationally.

Listed below are the various awards and accolades won by UNB in 2012:

  • Sheikh Khalifa Excellence Award – Diamond Category 2012
  • Lifetime Achievement Award to the CEO, UNB and Asia’s Most Preferred Brand in Banking & Financial Sector at the 2nd Asian Leadership Awards
  • Best Banking Group in the UAE at the World Finance Banking Awards 2012
  • 2012 Golden Europe Award for Quality and Commercial Prestige, presented by OMAC – Otherways Management Association Club, Paris
  • International Diamond Prize for Customer Satisfaction 2012, presented by the European Society for Quality Research in Rome, Italy
  • Best Savings Product for the UNB Smart Account Product at the Banker Middle East Product Awards 2012
  • Mohammad Bin Rashid Al Maktoum Business Award 2011 in the finance category for the second time, having earlier received this honour for the 2008 cycle
  • Best SME  Product for the UNB Medic Loan at the Banker Middle East Product Awards 2012
  • 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
  • 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
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