Mashreq and UNB edge into profit as UAE economy strengthens

Union National Bank’s flat profit still managed to beat analysts. Pawan Singh / The National

Two UAE lenders, Dubai-based Mashreq and Abu Dhabi-based Union National Bank (UNB), eked out a net profit in the first quarter of this year, amid signs of an economic improvement in the country.

Mashreq said on Wednesday in a statement that its net profit rose by 2.7 per cent to Dh546.2 million in the first quarter compared with Dh531.8m a year earlier, thanks to a 15 per cent drop in impairment charges to Dh310.7m.

Union National Bank said its first-quarter profit rose marginally, boosted by an increase in lending even as the money set aside to cover bad debt increased during the period.

Net profit rose to Dh452m in the first three months of the year compared with Dh450m in the same period the previous year, the bank said in a filing to the Abu Dhabi stock exchange. Net interest income and net income from Islamic financing rose by 5 per cent to Dh652m in the first three months of the year compared with Dh623m, the bank said.

Loans and advances increased by 8 per cent to Dh73.5 billion at the end of March compared with Dh68.3bn at the end of March last year.

Meanwhile net impairment charge on financial assets almost doubled to Dh169m in the first quarter compared with Dh85m a year earlier.

“The liquidity situation in the market has improved during the first quarter of 2017 with gradually improving prospects,” said Mohammad Nasr Abdeen, UNB’s chief executive. “However, the credit growth remained muted as the operating environment continues to align with new global and regional economic paradigm.”

“UNB Group, while pursuing its risk-based prudent strategy, will continue to invest in areas of growth and maintain strong capital levels and adequate liquidity,” he said.

UAE banks and financial institutions that lend have not had the best of times in recent years. Deposits have dwindled as government-related entities have withdrawn funds to plug growing budget deficits.

While the fall in the price of oil, which has been reversing since November, led to an increase in borrowing by governments to reduce those deficits, it has softened demand for loans among local corporations and increased the level of debt defaults. Among the hardest hit have been small and medium-sized businesses.

Yet despite the troubles, there are increasing signs of improvement in business conditions for banks, such as an increase in lending despite the provisions banks are continuing to take.

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