Nomura sees UAE's UNB with $354mln Dubai World exposure

Nomura sees UAE’s UNB with $354mln Dubai World exposure

Brokerage says bank has 1.3 bln dirhams exposure; Provisions for Dubai World to weigh on UNB's Q4 results; Nomura cuts UNB target price to 3.8 dirhams from 4 dirhams; UNB shares fall 0.9 percent

January 24, 2011 3:39 by Reuters

UAE lender Union National Bank (UNB) may have up to 1.3 billion dirhams ($353.9 million) exposure to state-owned conglomerate Dubai World, Nomura said in a research report on Monday.

Abu Dhabi-based UNB may not have booked any specific provisions for its exposure to the troubled entity, the brokerage said, forecasting the lender could need to book provisions of 260 million dirhams, assuming a 20 percent impairment.

“Management has yet to announce the bank’s exposure to Dubai World. We also believe that UNB has not yet booked any specific provisions related to this entity,” Nomura analyst Tarik El Mejjad said in a research note.

Dubai World, the Gulf emirate’s flagship conglomerate, has restructured $25 billion in debt but some banks are yet to fully book provisions for their exposure to the troubled firm. Nomura slashed its price target on UNB to 3.8 dirhams a share from 4 dirhams previously. The brokerage maintained its neutral rating on the stock.

The brokerage said provisions may weigh on the lender’s fourth-quarter results.

In the third quarter, UNB beat analysts’ forecasts by posting a 28 percent increase in net profit, helped by a surge in net interest income.

UNB shares closed 0.9 percent lower to 3.2 dirhams on the Abu Dhabi bourse Monday. (Reporting by Dinesh Nair, Editing by Amran Abocar)