UAE's Union National Bank (UNB) expects to maintain profit growth for the rest of the year after a 25 per cent rise in second-quarter net profit missed forecasts due to higher provisions.

The lender is banking on its core businesses to maintain its profit growth, its chief executive said yesterday.

'I think profit is sustainable in the second half as our core business is showing good growth and expansion of local branches will continue,' Mohamed Nasr Abdeen said.

Abu Dhabi-based UNB made a profit of Dh340 million ($92.57 million) in the three months to June 30.

That was up from Dh271.3 million a year earlier but short of the Dh374.2 million forecast on average by analysts polled by Reuters.

Operating income which includes interest income and fees, grew 24 per cent to Dh644.6 million versus Dh520.14 million a year earlier.

Loan impairments stood at Dh216.5 million at the end the first half after the bank booked 124.60m in the second quarter. It stood at Dh113.7 million in June last year.

'These are difficult days and provisions are a prudent step to keep a healthy balance sheet,' Abdeen said.

Loans grew to Dh53.53 billion by the end of June, up 4 per cent on the previous quarter and up 5 per cent from December 2009.

Deposits fell slightly to Dh50.74 billion in June from Dh51.27 billion in December.

'The core operations are solid with loans growth strong for a conservative bank like UNB although provisions are higher than expected,' said Janany Vamadeva, an analyst at HC Brokerage.

UAE lenders suffered a tough year in 2009 as a regional property boom came to an end and banks were forced to book hefty provisions against bad debt.

In May, Morgan Stanley cut Union National Bank to 'equal weight' from 'overweight'. -Reuters