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Bank of Sharjah posts $41m net profit for H1

Sharjah, July 30, 2011

Bank of Sharjah has reported a net profit of Dh152 million ($41.38 million) for the first half of 2011, as against the net profit of Dh276 million reached in the corresponding period of 2010.

The decrease in the current period was mainly caused by an increase in the collective impairment provisions, it said in a statement.

The bank has constituted a further Dh70 million of collective impairment provisions during the second quarter of 2011 in view of the slower than expected recovery in the UAE economy, and because of the new risk classification measures introduced by the UAE Central Bank, it said.

As of June 30, the bank’s collective impairment provisions reached Dh432 million, of which Dh90 million were constituted during the first half of 2011 versus nil in the first half of 2010, which caused the 45 per cent decline in the current year net income. This in turn led to the drop in the earnings per share figure.

The bank’s total assets as of June 30 reached Dh21.3 billion compared to Dh18.7 billion at the end of the same period in 2010, an increase of 13 per cent. As of June 30, the bank’s total deposits stood at Dh15.4 billion compared to Dh13.4 billion as of the same period in 2010, an increase of 15 per cent.

As of June 30, the bank’s loans and advances stood at Dh12.6 billion compared to Dh11.9 billion in the same period of 2010, an increase of 6 per cent.

The increase in deposits over loans and advances significantly enhanced the bank’s loans-to-deposits ratio which further reduced during the period to reach 0.82 in June 2011 from 0.89 in June 2010, the statement said.

Compared to the corresponding period of 2010, net liquidity surged by 73 per cent in the first half of 2011. As of June 30, the bank’s net liquidity stood at Dh5 billion versus Dh2.9 billion in the corresponding period of 2010. This improvement in liquidity, which was driven by the 15 per cent increase in deposits, led to the 12 per cent drop in net interest income, due to the depressed interbank interest rates.

Total comprehensive income reached Dh162 million compared with Dh231 million for the corresponding 2010 period, bringing the decline in the current period earnings to 30 per cent instead of 45 per cent.

“The political unrest which erupted in the Mena region at the beginning of the year continued to negatively impact the regional financial markets and economies,” said Varouj Nerguizian, executive director and general manager at Bank of Sharjah.

“This, coupled with the sovereign debt crisis, has revived concerns over global recovery which in turn resulted in a slower than expected recovery of the UAE economy. This could prove challenging to the banking industry in 2011 considering the subdued economic environment. Moreover, the adoption of new accounting standards has brought us into uncharted territory regarding the recognition of actual profit and thereafter its distribution.”

“While profitability is lagging behind due to general provisions, effective performance should be compared to the average of 2010, as the year-end figures are more reflective of the reality than the quarterly figures,” he added.

“In an uncertain environment prudential provisioning remains the key to meet the unexpected. In the first half of 2011, Bank of Sharjah has demonstrated the underlying strength of its core business operations. In particular, the bank has witnessed a significant increase in its deposit base and liquidity position,” Nerguizian concluded. – TradeArabia News Service




Tags: Bank of Sharjah | income | Net Profit | 2011 | First half |

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