United Arab Bank (UAB) announces its financial results for the six months ended June 30, 2016. The bank generated a net profit of AED71m for the first half of 2016, versus a net loss of AED511m in H2 2015.
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Provisions are stable at Q1 2016 levels, however, H1 2016 has experienced a substantial reduction compared H2 2015.
Provisions for Credit Losses in Q2 2016 were AED117m, broadly in line with Q1 2016 (AED114m) and significantly lower compared to Q3 2015 (AED466m) and Q4 2015 (AED288m) respectively, where the Bank adopted a proactive approach to manage the deterioration in asset quality within its ‘non-core’ portfolios.
Non-Interest Income of AED68m represents a 12% uplift compared to prior quarter, although Net Interest Income is 16% lower due to the planned reduction across the Bank’s higher risk "non-core" portfolios.
Given the strategic decision to deepen relationships by targeting ancillary revenue streams within its "core" Corporate Banking segment and capture cross-sales opportunities via complimentary Treasury and Retail offerings, the Bank recorded a 54% uplift in quarterly Fees & Commissions.
Operating Expenses of AED84m for the quarter were 7% lower than Q1 2016 and AED173m for H1 2016 were 20% below the first six months of 2015.
The benefits associated with the comprehensive review and subsequent overhaul of the Bank’s cost base is demonstrated by an improving Cost : Income Ratio of 36% in H1 2016, which compares favorably against FY 2015 (41%), with UAB firmly on track to deliver year on year cost savings in excess of its 20% target.
UAB has maintained its Non-Performing Loan Ratio at 4.3% by prudently managing growth in its "core" Customer Loans and continuing its strategy to proactively deleverage "non-core" portfolios.
In the first 6 months of 2016 these "non-core" portfolios have reduced by 34%, whilst overall they have been managed down 52% since 30th September 2015. UAB’s Coverage Ratio of 105% as at 30th June 2016 is consistent with the Bank’s policy of maintaining coverage at or in excess of 100%.
In line with the Bank’s ongoing deleveraging strategy, gross customer loans remained in line with Q1 2016 despite a 17% reduction in the ‘non-core’ portfolio.
The importance of maintaining an adequate funding base is demonstrated by a 3% uplift in "core" customer deposits compared to first quarter, with the Bank’s Loan : Deposit Ratio improving to 98% as at 30th June 2016.
UAB remains strongly capitalized with its Capital Adequacy Ratio maintained above 15% in Q2 2016, comfortably exceeding the regulatory requirement of 12%.
Similarly, the importance the Bank places on maintaining a robust liquidity profile is displayed by its Advances to Stable Resources Ratio of 82% and Eligible Liquid Asset Ratio of 15%, similarly well within Central Bank thresholds. ■