Business Bureau, Gulf Today

Bank of Sharjah on Thursday announced the results of the year ended 31 December 2019. The following Management Discussion and Analysis include financial results for Bank of Sharjah and its subsidiaries, together referred to as the ‘Group’.

The Bank’s UAE operations have generated a net profit of Dhs163 million for 2019 against Dhs130 million for 2018.

However, as a result of the exceptional situation in Lebanon, unrealised non-cash provisions were called for on the Bank’s subsidiary, Emirates Lebanon Bank SAL (ELBank) leading to a net loss of Dhs488 million.

The unrealized losses represent Dhs274 million goodwill impairment, out of which Dhs185 million is denominated in Lebanese Liras at the official LBP rate and Dhs377 million towards Expected Credit Losses (ECL) on limited exposure in Sovereign Bonds  and balances maintained with Banque Du Liban (BDL),  while it is expected that this ECL will be amortized as per expected BDL guidelines,  over five to ten years with effect from 2020 onwards and depending on compliance with Circular No. 13129, dated 4 November 2019, calling for the increase by 20% of the equity of Lebanese banks prior to 30 June 2020. It should be noted that Bank of Sharjah has complied fully with the above Circular.

By end June 2020, the LBP was trading above 6,000 to the USD and accordingly the bank has hedged its position and Q2 Group results are expected to recover around 50% of the losses imposed as at 31 December 2019.

Based on the above, we believe that the attention of our shareholders and market participants should be drawn to the change in market conditions in Lebanon and the expected issuance of a circular by BDL to have ECL constituted starting 2020 and over five years. Goodwill impairment has been hedged in Q2 2020 benefiting from the significant decline of the local currency against the USD.

The bank total assets were at Dhs31,747 million, up by 9% compared to 31 December 2018, while net loans and Advances at Dhs17,736 million, up by 3% compared to 31 December 2018.

The bank total customers’ deposits were Dhs21,326 million in 2019, up by 6% compared to 31 December 2018.

The bank also recorded net operating Loss of Dhs148 million, compared to net operating profit of Dhs469 million in 2018. Net loss of Dhs488 million were recorded in 2019, compared to net profit of Dhs130 million in 2018.

Return on Assets at (1.54%) and Return on Equity at (15.59%). Loans and Advances to Deposits Ratio at 83.16%.

The bank’s Non-Performing Loans ratio (Net) at 9.81%, Capital adequacy ratio at 11.59% and Tier 1 capital ratio at 10.42%.