Key Highlights
oProfit for the first half of 2014 of AED 1,032 million, up by 5% over the same period of 2013
oProfit for second quarter 2014 of AED 520 million, up by 6% over the same quarter of 2013
oLoans and advances of AED 62.0 billion as at 30 June 2014, up by 3% year-on-year
oCustomers' deposits of AED 67.0 billion as at 30 June 2014, up by 16% year-on-year
oTotal assets of AED 92.2 billion as at 30 June 2014, up by 15% over corresponding period prior year and up by 5% compared to prior year end
oConsistently sound liquidity position with loan to deposit ratio of 92.5% and advances to stable resources of around 82% as at 30 June 2014
oAsset quality continuing to improve with NPLs to gross loans of 3.9% and loan loss coverage of 91.3% as at 30 June 2014
oStrong capitalisation level with overall capital adequacy ratio of 18.9% with Tier 1 capital adequacy ratio of 17.8% as at 30 June 2014
Key Financial Indicators | |||
H1 14 |
H1 13 | Change % | |
Return on Average Equity (ROAE)* | 15.2 | 16.1 | (0.9) |
Return on Average Assets (ROAA)* | 2.3 | 2.4 | (0.1) |
Cost / Income ratio | 28.8 | 24.9 | (3.9) |
Capital Adequacy Ratio | 18.9 | 19.5 | (0.6) |
Earnings per Share (AED) | 0.35 | 0.33 | 6.1 |
* Annualized |
Income statement highlights | ||||||||
AED Million | Q2 14 | Q1 14 | Q2 13 |
QoQ |
YoY | H1 14 | H1 13 |
YoY |
Net interest income and net income from Islamic financing | 655 | 618 | 678 | 6 | (3) | 1,273 | 1,321 | (4) |
Non-interest income | 157 | 166 | 152 | (5) | 3 | 323 | 327 | (1) |
Operating Income | 812 | 784 | 830 | 4 | (2) | 1,596 | 1,648 | (3) |
Operating Expenses | 238 | 222 | 220 | (7) | (8) | 460 | 410 | (12) |
Operating profit | 574 | 562 | 610 | 2 | (6) | 1,136 | 1,238 | (8) |
Impairment Loss on financial assets | 46 | 44 | 112 | (5) | 59 | 91 | 239 | 62 |
Income Tax | 8 | 6 | 6 | (33) | (33) | 13 | 11 | (18) |
Net Profit | 520 | 512 | 492 | 2 | 6 | 1,032 | 987 | 5 |
Financial Position highlights | ||||||||
AED Billion | 30-Jun-14 | 30-Jun-13 |
Change | 31-Dec-13 |
Change | |||
Total Assets | 92.2 | 80.1 | 15 | 87.5 | 5 | |||
Loans and advances | 62.0 | 60.3 | 3 | 60.0 | 3 | |||
Customer Deposits | 67.0 | 58.0 | 16 | 65.1 | 3 | |||
Equity attributable to equity holders of the Bank | 15.8 | 14.4 | 10 | 15.2 | 4 |
Financial Review
Union National Bank (UNB), one of the leading banks based in the United Arab Emirates, recorded a profit of AED1,032 million for the first half of 2014 (H1-2013: AED 987 million), an increase of 5% compared to the corresponding period previous year. The profit for the second quarter of 2014 was AED 520 million (Q2-2013: AED 492 million), an increase of 6% compared for the same quarter of 2013 and was up by 2% quarter-on-quarter.
Commenting on the results, Mr. Mohammad Nasr Abdeen, Chief Executive Officer, Union National Bank said "Following a good first quarter results, the UNB Group further improved its performance in the second quarter of the year, with the profit for the first half of the year crossing the AED 1 billion mark. The Group remains on a solid footing as is evidenced by a calibrated increase in business, ample liquidity and strong capitalization levels". He added that "The asset quality continues to improve with the non-performing loans reducing both on an absolute basis as also relative to the gross loans, with the coverage being maintained at adequate levels".
The operating income for the six month period ended 30 June 2014 was AED 1,596 million (H1-2013: AED 1,648 million) slightly lower compared to that for the prior period. However, the operating income for the second quarter of the year increased by 4% on a quarter-on-quarter basis to AED 812 million. The net interest income and net income from Islamic financing for the six month period ended 30 June 2014 was AED 1,273 million
(H1-2013: AED 1,321 million) impacted mainly by a reduction in the net interest margin which was partly offset by an increase in the loans and advances and investments portfolio. Competitive banking pressures led to a reduction in the net interest margin to 2.86% for the first half of the year (H1-2013: 3.20%), although the net interest margin improved in the second quarter of the year. The non-interest income remained relatively stable at AED 323 million (H1-2013: AED 327 million) with the net fee and commission income boosted by 15% in the first half of the year to AED 283 million (H1-2013: AED 246 million) offset by loss from trading and non-trading financial instruments of AED 5 million against the gain of AED 42 million for the corresponding period of 2013.
Balance sheet
The total assets grew by 15% year-on-year and were up by 5% as compared to previous year end to reach AED 92.2 billion as at 30 June 2014 (31 December 2013: AED 87.5 billion).The loans and advances increased by 3% compared to the same period in 2013 and prior year end to reach AED 62.0 billion as at 30 June 2014 (30 June 2013: AED 60.3 billion, 31 December 2013: AED 60.0 billion). As part of the Group's effective liquidity management, the UNB Group increased its portfolio of high quality fixed income investments which was AED 11.0 billion as at 30 June 2014 (31 December 2013: AED 7.9 billion), up by 39% in the first half of the year. Customers' deposits also grew strongly by 16% to reach at AED 67.0 billion as at 30 June 2014 (30 June 2013: AED 58.0 billion) and up by 3% compared to previous year end (31 December 2013: AED 65.1 billion).
The loan to deposit ratio was 92.5% as at 30 June 2014 (31 December 2013: 92.2%) with the Central Bank of the UAE mandated advances to stable resources ratio being at circa 82% as at 30 June 2014 (31 December 2013: circa 82%) well within the regulatory norms. Liquidity continues to be effectively managed with liquid assets constituting 16.5% of the total assets as at 30 June 2014 (31 December 2013: 17.9%).
Operating expenses
The UNB Group has continued to expand its distribution network and now has 110 branches and offices spanning five countries. Ongoing investments in the areas of technology and infrastructure continue to further enhance the UNB Group's position to provide superior banking experience to its customers. The cost to income ratio for the UNB Group, remained among the best locally at 28.8% for the first half of 2014, while continuing to invest for the future with operating expenses increasing by 12% as compared to the corresponding period previous year to AED 460 million (H1-2013: AED 410 million).
Credit quality
In line with the trends over the previous several quarters, the asset quality measures have continued to improve with the NPLs to gross loans ratio being 3.9% as at 30 June 2014 (31 December 2013: 4.3%), a decline of 40 bps in the first half of 2014 and 20 bps in the second quarter. The loan loss coverage as at 30 June 2014 was 91.3% (31 December 2013: 90.7%). At the back of the improving asset quality, the impairment charge both in the first half and second quarter reduced significantly.
Profitability measures and Capital strength
The annualized return on average equity, excluding Tier 1 capital notes was 15.2% for the first half of the year (H1-2013: 16.1%) and the annualized return on average assets was 2.3% for the first half of the year (H1-2013: 2.4%). The earnings per share for the six-month period ended 30 June 2014 remained strong at AED 0.35 (H1-2013: AED 0.33), an increase of 6% compared with a year earlier. Capitalization levels continued to remain strong with the Overall Basel II capital adequacy ratio being 18.9% as at 30 June 2014 (31 December 2013: 19.9%) and the Tier I capital adequacy ratio being 17.8% as at 30 June 2014 (31 December 2013: 18.7%).
Ratings
During the second quarter of 2014, Capital Intelligence affirmed the Bank's Financial Strength Rating at 'A+', Foreign Currency Long-Term Rating at 'A+' and Short-Term Rating at 'A1' with 'Stable' Outlooks. Earlier in the year, Fitch Ratings had affirmed the Bank's rating as A+ Long-term IDR and F1 Short-term IDR with 'Stable' Outlook.
Awards and Accolades
In the first half of the year, the Bank has been the privileged recipient of numerous awards and accolades. Some of the prominent awards / accolades won by the Bank include:
2013 United Europe Award by Socrates Committee, Europe Business Assembly at an award ceremony held in United Kingdom
Prestigious 2014 Superbrand award for the 4th consecutive year
An Award of appreciation for being a strategic partner of the "Zakat Fund" Abu Dhabi.
Dubai Human Development Appreciation Award at the 20th Business Excellence Award Ceremony held in Dubai, UAE
2014 European Award for best practices, presented by the European Society for Quality Research at an award ceremony held in Brussels, Belgium.
Two awards at the 2014 Banker Middle East Product Awards for Best Car Loan and Best Personal Loan
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