Dubai: United Arab Bank (UAB) has reported a net profit of Dh28 million for the first quarter of 2017 supported by more than 50 per cent reduction in provision for credit losses.

“The operating performance for the first quarter of 2017 demonstrates tangible progress against our transformation strategy. The challenges which the bank has now largely overcome were significant, yet the decisive actions taken will see UAB well placed to deliver shareholder value in the medium term,” said Shaikh Faisal Bin Sultan Bin Salem Al Qasimi, chairman of the board of directors.

Over the last 18 months the bank went through a period of transition as it embarked on its journey to become a safer, stronger and sustainable bank. As part of this strategy, UAB set out its priorities such as strengthening of its core businesses; run down non-core portfolios; streamline the cost base; and steadily improve its key banking fundamentals.

During the first three month of the year the bank continued to record significant progress in de-leveraging its ‘non-core’ higher risk portfolios. In the first three months of 2017 these ‘non-core’ portfolios were reduced by a further 14 per cent compared to year end 2016, whilst in total they have been managed down 77 per cent since the third quarter of 2015. At the close of the first quarter this year, the bank has reported further contraction in high risk ‘non-core’ portfolio, which now constitute less than 4 per cent of total loans.

“We remain committed to completing our strategy and believe that our low-risk business model will make UAB a safer, stronger and sustainable bank and ensure it continues to play a key role in supporting the broader UAE economy,” said Al Qasimi.

The bank’s non-performing loans (NPL) ratio of 5.9 per cent is supported by legacy ‘non-core’ SME exposures reducing to less than 4 per cent of total loans, with the provision coverage standing at 117 per cent at the close of the first quarter of 2017.

“2017 represents the final stage of UAB’s transformation journey as the cost of risk begins to normalise, the bank effectively completes the exit of its residual higher risk non-core portfolio and core business units begin to grow. To that effect the first quarter delivered tangible progress against these milestones,” said Samer Tamimi, acting chief executive officer of UAB.

The bank’s liquidity profile remains strong with an improved loan to deposit ratio of 85 per cent compared to 101 per cent compared to last year. At the close of the first quarter customer deposits represent 82 per cent of bank’s total liabilities and remain the key source of funds. The bank reported capital adequacy ratio of 13.2 at the close of the first quarter.

“We strongly believe that our safe, low-risk business model is the right one, and our strategic progress and improving financial performance position us well for future success,” said Tamimi.