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Sun 6 May 2007 10:40 AM

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Abu Dhabi bank's profits plunge to $69m

Net income at Union National Bank falls 40% as the bank's IPO income dries up.

Abu Dhabi's Union National Bank posted its fourth straight decline in quarterly profit on a plunge in fees and commissions and a fall in interest income as revenue from initial public offerings dried up.

Net income at the emirate's fourth-largest lender by market value plummeted 40 percent in the three months to March 31 to AED 253.5 million ($69.04 million), or AED 0.16 per share, compared with AED 422.5 million, or AED 0.27 per share, in the year-earlier period, the bank said in a statement on the Abu Dhabi bourse Web site.

The bank generated only about a quarter of the fees and commissions of the year-earlier period, or AED 82 million, the data showed. Interest income fell almost 6 percent to AED 660.3 million.

"Last year's first-quarter income was related mainly to IPO and capital markets, like most Abu Dhabi-based banks, whereas this year there were no IPOs," Satya Dayanand, UNB's head of strategic planning and financial control, told Reuters by telephone in Abu Dhabi.

The earnings were below the average 22.1 percent decline three analysts forecast in a Reuters survey in March.

CORE BUSINESS GROWTH

Munir Shahin, banking analyst at Shuaa Capital, said the quarter-on-quarter performance was positive, however.

"Although the results are significantly lower than Q1 2006, they are 45 percent higher than fourth quarter 2006. So, on a quarter-to-quarter basis, the earnings are good and it is an indication of core business growth," he said.

"Q1 '06 was an exceptional (quarter) ... for all banks because of the IPO activity," he said. "So it is not bad as it looks, it could have been worse."

Shares of UNB closed unchanged on Thursday. They are down 3.3 percent this year to Wednesday's close, underperforming the index by almost 5 percent, according to Reuters data.

That compares with rivals like National Bank of Abu Dhabi which has outperformed the index by more than 11 percent. The index is up 2.15 percent this year to Wednesday's close.

"Even in Q1 '06, a large portion of lending was IPO-related advances," Dayanand said, when asked about the decline in interest income.

In a bid to diversify its sources of revenue UNB is expanding in the Middle East and beyond. In September it bought Alexandria Commercial and Maritime Bank. In December, it said applied to open a representative office in China.

UNB was also waiting for Qatar to approve its application to open a branch there, and was keen to enter India and North African countries such as Libya and Algeria, Chief Executive Mohammad Nasr Abdeen told Reuters in an interview.

Shares of UNB rallied in April on talk it might merge with Abu Dhabi Commercial Bank, which denied the reports.

Markets have been betting on consolidation among Abu Dhabi lenders since National Bank of Dubai and Emirates Bank International announced plans to merge at the behest of Dubai's ruler last month.

Kuwaiti investment bank Global Investment House gave a buy rating to UNB shares in February.

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