Higher interest rates drag on Union National Bank as profit falls

Union National Bank, the Abu Dhabi-based lender, said that its net income dropped by 27 per cent in the first quarter of the year as weakening eco­nomic growth prompted the bank to set money aside for bad debt.

The higher cost of maintaining deposits after interest rates rose in December weighed on profit margins.

Net income fell to Dh450 million in the first three months of the year compared with Dh615m a year earlier. The net impairment charge on financial assets rose by 49 per cent to Dh85m in the first quarter from Dh57m in the same period last year.

“The local banking sector is facing headwinds, which also saw some impact on the group’s profitability,” said Mohammad Nasr Abdeen, the bank’s chief executive. “2016 witnessed a soft start to the year as global economic activity moderates.”

As well as a rise in cash set aside for bad debt, UNB had a decline in net interest income as the interest it paid on deposits rose, squeezing its margins. Net interest income and net income from Islamic finance dropped by 12 per cent in the first quarter to Dh623m.

Meanwhile non-interest income slipped by 17 per cent to Dh190m.


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