UNB to take blow from Egyptian upheaval

Union National Bank's troubles mount as Egypt revolts and investors prepare for full-year earnings to be released on Monday.

The turmoil in Cairo could not come at a worse time for Union National Bank (UNB), which is due to report earnings today.

The bank's share price fell 5.33 per cent to Dh3.02 yesterday as traders digested the extent of the bank's possible losses in Egypt.

EFG-Hermes said UNB had 4 per cent of its assets in Egypt, with Dh90 million in revenues coming from the country. Four per cent of the banks' deposits were also in Egypt.

Worries also persist about debt levels at the bank, which faces a $1 billion loan maturing at the end of this year.

The bank had access to cash and near-cash items worth $639.2m as of last September and made net profits of $315m last year, but uncertainties over provisioning loom large.

A recent report from Nomura said the bank may have an exposure to the troubled conglomerate Dubai World worth about Dh1.3bn, estimating that the bank will require provisions worth $70.7m.

"Management has yet to announce the bank's exposure to Dubai World," the Nomura analyst Tarik el Mejjad wrote. "We also believe that UNB has not yet booked any specific provisions related to this entity."

This month, UNB announced its participation in a $1.24bn syndicated loan with Etisalat Egypt (also known as Etisalat Misr) to fund the telecommunications company's expansion, which UNB said was the largest deal in the history of the country's telecoms industry.

The regime of Hosni Mubarak had cut access to mobile phone services and the internet across the country, but even though the phone services were restored last night, the future of this project is uncertain.

But Jaap Meijer, a financial analyst at Alembic HC Securities, said the bank would tackle any coming issues from a position of strength.

"UNB is one of the best capitalised banks in the UAE after Commercial Bank of Dubai," Mr Meijer said. "We think UNB has the strongest short-term liquidity position of all the UAE banks."

The stock is also attractively valued, he said, trading at 0.7 times book value.