The regional exposure of Union National Bank (UNB) has not detracted from the Abu Dhabi lender's potential for profit and discounted price.
The bank's lending to troubled Dubai companies and investment in Egypt have been a black mark on UNB's share price in the past.
But for Goldman Sachs, the lender's financial results give reason to maintain a "buy" rating and increase its target price from Dh6.03 to Dh6.32 - more than double yesterday's closing price of Dh3.09.
The bank's fourth-quarter profit fell 23.9 per cent from the same period in 2009 to Dh174 million.
However, UNB booked robust profits for the year as a whole with earnings rising 16.6 per cent to Dh1.35 billion.
It booked impairment charges of Dh482.4m for last year, a rise of 67.2 per cent from the previous year.
The figure included impairments for the Dubai World conglomerate, and the Saad and Al Gosaibi groups, two Saudi conglomerates that defaulted in 2009.
Although UNB stopped short of revealing its total exposure to any of these groups, saying only that non-performing loans accounted for 4.3 per cent of its loan book, some clarity on exposure to Dubai World has put minds at rest.
General provisions of about Dh600m are anticipated to be made over the next four years to comply with Central Bank regulations, the Goldman note said, adding the bank was expected to swing to a profit this year.
This is even if the bank were to write off its stake in its Egyptian unit, which represents about 4 per cent of the bank's total assets and is therefore a negligible amount to most analysts.
Risks on the bank's balance sheet remain, including lower property prices than expected in the UAE and asset quality deterioration as a result of market volatility, but the Goldman note said "UNB's balance sheet now has high levels of liquidity and cash".
General negative sentiment has pushed the share price 6.3 per cent lower in the past two days alone, but since last June the stock has increased 9.6 per cent.
UNB's shares closed yesterday at Dh3.09.