UAB generates net profit of AED71mn in first half of 2016

Sharjah / WAM

The United Arab Bank, UAB, announced its financial results for the six months ended June 30, generating a net profit of AED71 million.
The bank says that it is returning to its traditional ‘core’ corporate roots, complemented by focussed retail and treasury propositions, while continuing to pro-actively de-leverage from its ‘non-core’ higher risk portfolios in an economically rational manner. This transition has enabled the bank to comprehensively streamline its cost base, which will underpin delivery of sustainable returns going forward.
Sheikh Faisal bin Sultan bin Salem Al Qassimi, Chairman of the Board of Directors, said, “The board is pleased to see the improved operating performance continue into the second quarter, demonstrating the strength of our ‘core’ business. Although 2015 was a challenging year for UAB, when we look back, I am increasingly confident it will be viewed as a defining period for the bank.”
“We continue to explore various options to accelerate the process of managing down the ‘non-core’ elements of our business so that the bank’s performance converges with our ‘core’ segments within an optimal timeframe,” he said.
“While the transformation strategy has delivered substantial changes to the size, shape and risk profile of the business, we realise that the continued uncertainty in the macro-economic environment will require robust oversight of the bank’s governance and control frameworks across 2016 and beyond to protect the long-term interests of our shareholders,” Sheikh Faisal added.
Samer Tamimi, Acting Chief Executive Officer, commented, “These positive results provide further tangible evidence that our revised strategy is appropriate given the economic environment. I am pleased to report that our financial performance is aided by a significant progress within our ‘core’ business in addition to reduction in provisions and material cost savings. Non-interest income is up by 12 per cent quarter on quarter due to increased focus on generating ancillary revenue streams, and our ‘core’ customer deposits grew by 3 per cent against March 2016. Gross loans remained in line with Q1 2016 despite a further 17 per cent reduction in our ‘non-core’ in the second quarter.
“Our provisions are stable at Q1 2016 levels, however, H1 2016 has experienced a substantial reduction compared H2 2015. Looking further ahead, as UAB continues its transition to a lower risk model, these reductions will moderate further in the medium to long term,” he added.
The UAB’s net profit was primarily driven by growth in non-interest income and reduction in operating expenses following the comprehensive review of the bank’s streamlined business model.
Provisions for credit losses in Q2 2016 were AED 117 million, broadly in line with Q1 2016 (AED114 million) and significantly lower compared to Q3 2015 (AED466 million) and Q4 2015 (AED288 million) respectively, where the bank adopted a proactive approach to manage the deterioration in asset quality within its ‘non-core’ portfolios.
Non-interest income of AED 68 million represents a 12 per cent rise compared to prior quarter, although net interest income is 16 per cent 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 our ‘core’ corporate banking segment and capture cross-sales opportunities via complimentary treasury and retail offerings, the bank recorded a 54 per cent rise in quarterly fees and
commissions.
Operating expenses of AED 84 million for the quarter were 7 per cent lower than Q1 2016 and AED173 million for H1 2016 were 20 per cent 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 per cent in H1 2016, which compares favourably against FY 2015 (41 per cent), with UAB firmly on track to deliver year-on-year cost savings in excess of its 20 per cent target.