Dubai: Bank of Sharjah Group reported a consolidated net loss of Dh666 million for 2020 after making significant provisions for its Lebanese subsidiary Emirates Lebanon Bank SAL (ELBank).
The application of hyperinflation effect on Lebanese operations as per the International Accounting Standards has resulted in the bank slipping into a consolidated loss.
Upon application of Dh842 million as hyperinflation effect plus other deductions the Group recognised a net loss of Dh666 million and a total comprehensive loss of Dh724 million versus a positive equity component of Dh879 million.
Hyperinflation effect
The International Monetary Fund (IMF) has categorized Lebanese economy hyperinflationary for the purposes of applying IAS 29 and for the retranslation of foreign operations in accordance with IAS 21 and its effects on the consolidated financial statements for the year ending 31 December 2020.
Consequently, the Group was asked to apply IAS 29 and IAS 21 financial reporting in hyperinflationary economies to its subsidiary, Emirates Lebanon Bank SAL starting from January 1, 2020 resulting in the consolidated losses.
The Group’s operations in Lebanon continued to witness unprecedented events stemming from political and economic turmoil, since October 2019.
The Group said it has complied with Banque du Liban (BDL) Circular No. 13129, dated 4 November 2019, calling for the increase by 20 per cent of the equity of Lebanese banks prior to 30 June 2020.
Strong balance sheet
The Group said balance sheet remains strong, with total assets standing at Dh36.14 billion reflecting an increase of 14 per cent year on year and total equity of Dh 3.17 billion reflecting an increase of 5 per cent.
The Group continues to enjoy a high asset quality and other robust metrics that remain healthy as a result of strict adherence to maintaining a disciplined and focused approach to lending, recovery and funding.
Liquidity remains comfortable and has a solid capital position with a customer deposit base of Dh23.67 billion reflecting an increase of 11 per cent for the year, with a loans-to-deposits ratio of 82 per cent at the year-end 2020.
