* Q2 net profit 515.6 mln dhs vs 488.3 mln dhs yr-ago - statement
* Q2 impairments 46 mln dhs, down 59 pct y-o-y (Changes dateline, adds detail, context)
ABU DHABI, July 20 (Reuters) - Union National Bank, 50 percent owned by the Abu Dhabi government, edged ahead of analysts' forecasts as it posted a 5.6 percent increase in second-quarter net profit on Sunday due to lower impairments.
The fifth-largest lender on the Abu Dhabi exchange by market value reported a net profit of 515.6 million dirhams ($140.4 million) for the second quarter, up from 488.3 million dirhams in the same three-month period last year, a bourse filing said.
Five analysts polled by Reuters forecast an average profit of 499.6 million dirhams for the quarter.
A reduction in impairments, which more than halved year-on-year to 46 million dirhams in the second quarter, supported the profit gain.
"The asset quality continues to improve with the non-performing loans reducing both on an absolute basis also relative to the gross loans," Mohammad Nasr Abdeen, chief executive of UNB, said in the statement.
The fall helped to offset a 3.3 percent drop in UNB's net interest income, which dipped to 654.9 million dirhams as a slight gain in loan growth was offset by a decline in the margin it earned on its lending.
Loans and advances increased 3 percent year-on-year to stand at 62 billion dirhams on June 30 while deposits jumped 16 percent over the same timeframe to 67 billion dirhams. ($1 = 3.6727 United Arab Emirates Dirhams) (Reporting by Stanley Carvalho; Editing by Andrew Torchia and David French)