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INTERIM CONDENSED FINANCIAL STATEMENTS

30 SEPTEMBER 2006 (UNAUDITED)










REVIEW REPORT ON INTERIM CONDENSED FINANCIAL STATEMENTS
TO THE BOARD OF DIRECTORS OF
UNITED ARAB BANK PUBLIC JOINT STOCK COMPANY

We have reviewed the accompanying interim condensed balance sheet of United Arab Bank Public Joint Stock Company (the “Bank”) as at 30 September 2006 and the related interim condensed statements of income, changes in equity and cash flows for the nine-month period then ended and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting (“IAS 34”). Our responsibility is to express a conclusion on these interim condensed financial statements based on our review.

We conducted our review in accordance with the International Standard on Review Engagements 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed financial statements are not prepared, in all material respects, in accordance with IAS 34.






Signed by
Edward B Quinlan
Partner
Registration No. 93

10 October 2006

Sharjah, United Arab Emirates

United Arab Bank P.J.S.C.
STATEMENTS OF INCOME
30 September 2006 (Unaudited)


Three months ended 30 Sep Nine months ended 30 Sep
2006 2005 2006 2005
Note AED’000 AED’000 AED’000 AED’000

Interest income 77,411 59,635 219,348 161,404
Interest expense (22,455) (18,132) (67,503) (48,491)
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NET INTEREST INCOME 54,956 41,503 151,845 112,913

Net fees and commission income 12,537 12,594 46,555 36,672
Gains less losses arising from dealing in
foreign exchange currencies 4,340 4,057 13,074 11,299
Changes in fair value of trading investments (72) - (15,622) -
Gain on sale of an investment 5,022 - 5,022 -
Other income 1,011 490 3,644 1,609
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77,794 58,644 204,518 162,493
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Staff expenses (18,380) (15,666) (53,680) (45,008)
Depreciation (1,205) (1,144) (3,345) (3,269)
Other expenses (5,126) (4,152) (15,652) (12,469)
Provision for credit losses (9,655) (6,443) (20,553) (13,461)
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(34,366) (27,405) (93,230) (74,207)
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NET PROFIT FOR THE PERIOD 43,428 31,239 111,288 88,286
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Earnings per share (AED) 3 0.07 0.05 0.18 0.14
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United Arab Bank P.J.S.C.
BALANCE SHEET
30 September 2006 (Unaudited)


30 September 31 December
2006 2005
AED’000 AED’000

ASSETS
Cash and balances with UAE Central Bank 227,253 359,764
Trading investments 13,056 28,679
Due from banks 374,246 510,098
Loans and advances to customers 3,343,615 2,951,741
Non-trading investments 189,117 171,550
Premises and equipment 17,650 17,560
Other assets 86,335 93,221
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TOTAL ASSETS 4,251,272 4,132,613
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LIABILITIES AND SHAREHOLDERS’ EQUITY

LIABILITIES
Due to banks 189,406 192,302
Due to Central Bank 16,238 -
Customers’ deposits 2,887,502 2,905,501
Other liabilities 109,400 76,343
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TOTAL LIABILITIES 3,202,546 3,174,146
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SHAREHOLDERS’ EQUITY
Share capital 635,460 508,368
Statutory reserve 184,580 184,580
General reserve 7,811 7,811
Special reserve 102,025 102,025
Proposed scrip dividend - 127,092
Retained earnings 111,851 563
Cumulative changes in fair values 6,999 28,028
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TOTAL SHAREHOLDERS’ EQUITY 1,048,726 958,467
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 4,251,272 4,132,613
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_______________________________
Bertrand Giraud
General Manager
10 October 2006


United Arab Bank P.J.S.C.
STATEMENT OF CASH FLOWS
30 September 2006 (Unaudited)


Nine months ended 30 September
2006 2005
AED’000 AED’000

OPERATING ACTIVITIES
Net profit for the period 111,288 88,286
Adjustments for:
Depreciation 3,345 3,269
Provision for credit losses 20,553 13,461
Fair valuation loss on trading investments 15,622 -
Gain on sale of an investment (5,022) -
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Cash from operations before changes in operating assets and liabilities 145,786 105,016
Loans and advances (412,427) (662,568)
Other assets 6,886 (23,257)
Customers’ deposits (17,999) 855,537
Due to banks (1,836) (110,187)
Other liabilities 33,057 235,481
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Net cash (used in) from operating activities (246,533) 400,022
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INVESTING ACTIVITIES
Additions to premises and equipment (net) (3,435) (3,271)
Purchase of investments (41,055) (33,852)
Proceeds from sale of an investment 7,482 18,370
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Net cash used in investing activities (37,008) (18,753)
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FINANCING ACTIVITIES
Proceeds from issue of share capital - 203,348
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Net cash from financing activities - 203,348
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(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (283,541) 584,617

Cash and cash equivalents at 1 January 826,313 527,291
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CASH AND CASH EQUIVALENTS AT 30 SEPTEMBER 542,772 1,111,908
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Cash and cash equivalents comprise the following balance sheet amounts with original maturities of three months or less:

Cash and cash balances at UAE Central Bank 227,254 440,348
Due from banks maturing within ninety days 374,246 863,771
Due to banks maturing within ninety days (42,490) (192,211)
Due to UAE Central Bank within ninety days (16,238) -
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542,772 1,111,908
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United Arab Bank P.J.S.C.
STATEMENT OF CHANGES IN EQUITY
30 September 2006 (Unaudited)
Cumulative
Share Statutory General Special Proposed Retained changes in
capital reserve reserve reserve scrip dividend earnings fair value Total
AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000 AED’000

Balance at 1 January 2006 508,368 184,580 7,811 102,025 127,092 563 28,028 958,467
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Net movement in cumulative changes in fair value - - - - - - (21,029) (21,029)
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Total income and expense for the period recognised directly in equity - - - - - - (21,029) (21,029)

Net profit for the period - - - - - 111,288 - 111,288
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Total income and expense for the period - - - - - 111,288 (21,029) 90,259
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Scrip dividend 127,092 - - - (127,092) - - -
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Balance at 30 September 2006 635,460 184,580 7,811 102,025 - 111,851 6,999 1,048,726
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Balance at 1 January 2005 338,911 67,423 11,811 86,542 67,782 1,137 (162) 573,444
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Net movement in cumulative changes in fair value - - - - - - 198 198
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Total income and expense for the period recognized directly in equity - - - - - - 198 198

Net profit for the period - - - - - 88,286 88,286
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Total income and expense for the period - - - - - 88,286 198 88,484
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Scrip dividend 67,782 - - - (67,782) - - -
Rights issue and premium 101,675 101,674 - - - - - 203,349
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Balance at 30 September 2005 508,368 169,097 11,811 86,542 - 89,423 36 865,277
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1 INCORPORATION AND ACTIVITIES

United Arab Bank was incorporated as a public company with limited liability in the Emirate of Sharjah in 1975 by a decree of His Highness The Ruler of Sharjah and has been registered as a Public Joint Stock Company under the UAE Commercial Companies Law No. (8) of 1984 (as amended). The Bank’s registered office is located in the Emirate of Sharjah, United Arab Emirates. The address of the registered office is PO Box 25022, Sharjah, United Arab Emirates.

The Bank carries on the business of commercial banking through its ten offices and branches in the United Arab Emirates.


2 ACCOUNTING POLICIES

The interim condensed financial statements of the Bank are prepared in accordance with International Financial Reporting Standard 34, Interim Financial Reporting. The accounting policies used in the preparation of the interim condensed financial statements are consistent with those used in the preparation of the annual financial statements for the year ended 31 December 2005. The interim condensed financial statements do not contain all information and disclosures required for full financial statements prepared in accordance with International Financial Reporting Standards and should be read in conjunction with the Bank’s annual financial statements as at 31 December 2005. In addition, results for the 9 months ended 30 September 2006 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2006.


3 EARNINGS PER SHARE

Earnings per share is calculated by dividing the net profit of AED 111,288 thousand for the period to 30 September 2006 (2005: net profit of AED 88,286 thousand) by the weighted average number of shares of 635,460,000 (2005: 627,927,543) of AED 1 each outstanding during the period.


4 SEGMENTAL INFORMATION

Primary segment information
For management purposes, the Bank is organised into three major business segments:

Retail banking - principally handling individual customers’ deposits, and providing consumer type loans, overdrafts, credit card facilities and funds transfer facilities;

Corporate banking - principally handling loans and other credit facilities and deposit and current accounts for corporate and institutional customers;

Treasury - principally providing money market, trading and treasury services, as well as the management of the Bank’s funding operations by use of placements with and acceptances from other banks, through treasury and wholesale banking.

These segments are the basis on which the Bank reports its primary segment information. Transactions between segments are conducted at estimated market rates on an arm’s length basis. Interest is charged / credited to business segments based on a pool rate which approximates the marginal cost of funds.


4 SEGMENTAL INFORMATION - continued

Segmental information for the period ended 30 September 2006 was as follows:

Retail Banking Corporate Banking Treasury Total
AED’000 AED’000 AED’000 AED’000

Interest and other income 40,432 212,266 19,323 272,021
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Net profit for the period 15,724 82,548 13,016 111,288
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Segment assets 540,709 2,887,135 823,428 4,251,272
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Segment liabilities 983,784 2,006,554 212,208 3,202,546
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Segmental information for the period ended 30 September 2005 was as follows:

Retail Banking Corporate Banking Treasury Total
AED’000 AED’000 AED’000 AED’000

Interest and other income 64,192 124,607 22,095 210,894
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Net profit for the period 23,497 45,613 19,176 88,286
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Segment assets 1,044,569 2,027,691 1,491,960 4,564,220
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Segment liabilities 1,728,720 1,764,110 206,114 3,698,944
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Secondary segment information
The Bank operates in only one geographic area, namely United Arab Emirates. Accordingly, no further geographical analysis of operating income, net profit and net assets is given.


5 COMMITMENTS AND CONTINGENT LIABILITIES

The Bank has the following credit related commitments:
30 September 31 December
2006 2005
AED’000 AED’000
Commitments on behalf of customers:
Acceptances 266,654 234,839
Letters of credit 408,856 347,303
Guarantees 1,401,808 1,366,060
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2,077,318 1,948,202
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Irrevocable commitments to extend credit:
Original term to maturity of one year or less - -
Original term to maturity of more than one year 1,344,613 1,242,193
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1,344,613 1,242,193
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6 COMPARATIVE AMOUNTS

Certain corresponding figures for period ended 30 September 2005 have been reclassified in order to conform with the presentation for the current period. Such reclassifications do not affect previously reported net profit or shareholder’s equity.