Dubai: Bank of Sharjah on Thursday reported a 6 per cent increase in its first half 2014 net profits at Dh152 million, compared with Dh144 million for the same period of 2013.

The bank’s loan book grew by 8 per cent in the first six months of the year with loans and advances totalling Dh13.94billion compared to Dh12.89 billion the corresponding period in 2013 and 6 per cent above Dh13.13 billion at the year end 2013.

Total assets reached Dh23.8 billion in the first six months of 2014, an increase of 5 per cent over the same period in 2013. When compared to the December 31, 2013 figure, total assets declined by 5 per cent from Dh24.97 billion. The bank attributed the decline to a 6 per cent decline in customer deposits from Dh18.37 billion at the year end 2013, to Dh17.21 billion at the close the first half this year.The main reason for the decline in deposits was due to the unwinding of expensive and unstable deposits.

The bank saw drop in net liquidity between December 2013 and June 2014 due to decline in deposits. However, the bank’s net liquidity remained substantially high, compared to industry levels, at Dh5.3 billion, representing more than 30 per cent of customer deposits.

Sharp declines

Total operating income for the six months of this year declined by 18 per cent compared to the corresponding period of 2013, mainly due to the decline in both net interest income and non-interest income. The decline in net interest income was mostly driven by the overall decline in market interest rates, and the fact that the high liquidity held by the bank is placed in money market instruments generating negligible yields.

Meanwhile, the decline in non-interest income resulted from the unrealised revaluation losses on the investment portfolio due to the sharp declines witnessed by the UAE stock markets, exacerbated by margin trading. Bank of Sharjah’s management believes that those declines are temporary, and markets will adjust during the third quarter when operating income will resume its upward trajectory.

“As a corporate and investment bank, we were affected by the market slump; however, this is an interim situation that will be corrected by year end,” said Varouj Nerguizian, Bank of Sharjah’s Executive Director and General Manager.

Cash dividend

Shareholders’ equity at the end of the second quarter of 2014 stood at Dh4.27 billion, 5 per cent above the balance for the corresponding period of 2013. However, it declined by 2 per cent when compared to the year end 2013 figure of Dh4.35 billion largely on account of Dh176 million cash dividend on 2013 profits.

Capital adequacy ratio, which stood at 21.69 per cent as of June 30, 2014. Net impairment charges on financial assets for the first half of 2014 declined by 67 per cent, as a result of the improved economic environment and the overall performance of the credit portfolio.