190807 Update Bank of Sharjah pictures
Bank of Sharjah's UAE numbers sport a healthy hue, with a sharp rise in 2020 net profit. Image Credit: Supplied

Dubai: Bank of Sharjah had accumulated losses of Dh182.15 million as of end last year, principally brought on by regulatory requirements at its Lebanon operations. Bank of Sharjah operates a subsidiary, Emirates Lebanon Bank, and which was provided with equity support.

This followed a directive from Lebanon’s central bank – Banque du Liban – for a collective increase by 20 per cent in the equity of the country’s banks. This came after the country went into economic and political meltdown, with the banking sector coming under intense stress. This was given a cut-off timeline of June 30, 2020.

As a result, Bank of Sharjah was “compelled to retroactively register ‘expected credit loss’ figures in the Q1-2020 financial results,” the UAE bank said in a statement. “It is important to stress that the operating income before impairments of ELBank remains in line with last year’s comparable period results.”

Domestic strength

In its home market, the group’s performance remains “resilient”, reflected in the net profit of Dh309 million for 2020, a sharp increase on the Dh163 million from 2019. Also, accumulated losses to capital ratio dropped below the crucial 20 per cent mark – from 21.9 per cent in the first quarter of 2020 all the way down to 8.67 per cent.

But as the year ended, the bank had to make provisions for hyperinflation related to its Lebanon operations. “Accordingly, the bank showed losses in P&L but a higher compensation in equity,” said the UAE bank. “That was why at year-end 2020, despite the apparent losses, the equity went up.

“The effects on P&L and equity were merely accounting entries that has nothing to do with the group’s performance – as such there is no remedy issue to act upon.”