UAB back in black with Dh45m 9-month profit

United Arab Bank on Monday posted a net profit of AED 45m in the first nine months of 2021 as compared to net loss of Dh365m during corresponding nine months of 2020.

In a statement, the Sharjah-based bank said net profit rose seven per cent if compared quarter-on-quarter basis as it earned Dh18 million in July-September period versus Dh17 million in second quarter of 2021 due to successful execution of the turnaround strategy that paved the way for a return to profitability.

“The UAB is continuing to strengthen its core businesses, streamline the cost base, and maintain key banking fundamentals. The bank’s performance was aided by a significant progress within the ‘core’ businesses recording an 11 per cent year-on-year uplift in total income, whilst operating expenses continue to be robustly managed and recorded a reduction of nine per cent year-on-year basis,” according to the statement.

The balance sheet has been significantly strengthened with a focus on quality assets which resulted in recording 76 per cent year-on-year reduction in provisions compared to September 2020.

Success of digital transformation strategy

Ahmad Abu Eideh, chief executive officer of United Arab Bank, said these positive results demonstrate the success of the bank digital transformation strategy and are a testament to the efforts made by every member of our team and the exceptional work carried out in dealing with the challenges imposed by the Covid-19 pandemic.

“The investment that the bank started in developing and modernizing the technological infrastructure and hence moving forward towards the digital world and the successful execution of the turnaround strategy paved the way for a return to profitability," he said.

"We are confidently looking forward to the future and continuously developing and improving our business model and activities in line with our customer base and sustainable growth strategy," he added.

The bank continues to support growth in ‘core’ businesses, whilst ensuring it captures all available cross sales opportunities. Customer deposits have and will continue to represent the bank’s key source of funds evidenced through 81 per cent concentration in total liabilities compared to 86 per cent in the same period last year.

Operating expense rises

Operating expenses during the first nine months of 2021 rose nine per cent to Dh180 million as the bank continues to rationalise its cost base through optimisation of costs and avoiding non-essential general and administrative expenditure and branch rationalisation.

Provision charges on a total portfolio basis, the bank continues to demonstrate significant improvement with a solid 76 per cent reduction this year as the bank focuses on its remediation efforts and recoveries. Consequently, total income increased to Dh337 million during the January-September 2021 period from Dh303 million in the same period last year. Non-Interest Income streams increased to 36 per cent of total income versus 26 per cent previous year.

The bank’s liquidity profile remains strong as evidenced by a robust loan to deposit ratio of 78 per cent. Customer deposits (being 81 per cent of total liabilities) have and will continue to represent the bank’s key source of funds. The bank’s provisions for credit losses of Dh112 million represent a healthy reduction of 76 per cent compared to same nine-month period last year because of prudent risk management and focused reduction in risk weighted assets. Going forward, UAB’s transition to a lower risk model should see these moderate further in the medium term.

— muzaffarrizvi@khaleejtimes.com