Tight liquidity drags UNB’s Q2 profit lower - Emirates24|7

Tight liquidity drags UNB’s Q2 profit lower

Union National Bank, which is 50 per cent owned by the Abu Dhabi government, beat analyst estimates on Thursday with a 17.3 per cent drop in second-quarter net profit due to challenging market conditions.

It was the fourth successive quarter the lender has reported reduced earnings as it continues to be hit by reduced government spending in the UAE and tight liquidity conditions in the wake of lower oil prices.

The fifth-largest lender in the emirate by assets reported a net profit attributable to equity holders of Dh469.5 million ($127.9 million) in the three months to June 30, down from Dh568 million in the same period a year earlier.

That was ahead of the average forecast of Dh420 million in a Reuters poll of four analysts.

"The tighter liquidity environment has led to a higher cost of deposits with the net interest income being adversely impacted," the bank said in a statement.

It said income from traditional banking practices fell 17 per cent year-on-year to Dh636 million.

Its net interest margin - the difference in how much the bank pays on deposits and how much it earns on lending -- fell 52 basis points to 2.64 per cent in the first half of the year.

Total deposits on June 30 were little changed from a year earlier at Dh73.3 billion, although they were down 2 per cent from the end of 2015. Loans and advances stood at Dh70.1 billion on June 30, up 4 per cent year on year.

A 10 per cent increase in non-interest income to Dh232 million, as well as an 11 per cent decrease in provisions for bad loans, helped alleviate some of the impact.

 

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