Union National Bank, better known as UNB, on Tuesday said its second-quarter net profit rose 9.7 per cent to Dh459.6 million on strong revenue growth.

The Abu Dhabi-based bank said its first-half earning rose 6.3 per cent to Dh934.4 million as the bank sustained a steady business growth.

“The operating profit for the first six months of the year was seven per cent higher to Dh1.183 billion. The operating income for the same period also rose 7.1 per cent to Dh1.561 billion due to an increase in net interest income.

Net income from Islamic financing rose to Dh1.243 billion, reflecting an increase of 10.3 per cent,” the bank said in a regulatory filing. The loans and advances of Dh57.3 billion as at June 30, 2012 was up by 1.9 per cent compared to prior period, but was slightly lower compared to the 2011 year-end. The customers’ deposits were 2.6 per cent higher to Dh60 billion. “Sharp liquidity management in conjunction with a reduction in cost of deposits led to an improved net interest margin in the first half of over three per cent,’the bank said, adding that this along with a higher average interest earning assets led to an increase in the net interest income and income from Islamic financing.

The non-interest income decreased by 3.7 per cent to Dh317.8 million in the first half of the year due to a drop in the fee and commission income following the implementation of the Central Bank of the UAE guidelines on lending to individuals. However, this drop was partly offset by gains on dealing in foreign currencies and trading and non-trading financial instruments which together increased by 136.7 per cent in first half to Dh60.6 million.

The group continued to maintain comfortable liquidity position with liquid assets constituting 19.4 per cent of the total assets as at June 30, 2012.

Mohammad Nasr Abdeen, chief executive officer, UNB, said the results show a consistent improvement over the corresponding period last year, underscoring the considerable strength of the bank’s franchise and business model. He said the group’s financial position remains strong as is evident from the various key performance metrics.

“It was particularly gratifying to note that over the last few months the bank had been a recipient of numerous quality related awards both locally and internationally, in recognition of the bank’s significant progress and commitment in the area of quality and service excellence,” he said.

The group’s cost to income ratio of 24.2 per cent in the first half of 2012 remains amongst the lowest in the local banking industry, in spite of a modest increase in operating expenses by 7.4 per cent in the six month period ended June 30, 2012 to Dh378.5 million.

The ratio of non-performing loans to gross loans and advances was 4.9 per cent as at June 30, 2012 against 3.7 per cent as at December 31, 2011 with the loan loss coverage being atood firm at 62.1 per cent.

The strong capital position of the group was further augmented with the Basel II capital adequacy ratio, after distribution of the cash dividend for fiscal 2011 and payment of interest on the Tier 1 capital notes, improving to 23.1 per cent as at 30 June 2012 over 21.9 per cent as at December 31 2011, an increase of 120 basis points.