190807 Update Bank of Sharjah pictures
Bank of Sharjah. While reporting the Q1 2020 result, the bank was forced to restate the accounts of its Lebanese subsidiary for the hyperinflationary conditions prevailing Lebanon. Image Credit: Supplied

Sharjah: Bank of Sharjah Group has reported a first quarter consolidated net profit of Dh89 million, prior to making hyperinflation provisions for its fully owned Lebanese subsidiary Emirates Lebanon Bank SAL (ELBank).

Lebanon continues to witness unprecedented events stemming from political and economic turmoil, since 17 October 2019.

While reporting the Q1 2020 result, the bank was forced to restate the accounts of its Lebanese subsidiraty accounting for the hyperinflationary conditions prevailing Lebanon.

According to the International Monetary Fund’s (IMF) inflation forecasts, Lebanese economy is considered hyperinflationary for the purposes of applying IAS 29 [International Accounting Standards] and for the retranslation of foreign operations in accordance with IAS 21.

Complying to the above accounting standards, the bank applied Sh211 million as hyperinflation effect and recognized a consolidated net loss of Dh122 million and a total comprehensive loss of Dh111 million versus a positive equity component of Dh265 million.

Resilient UAE operations

The bank said despite the challenging environment, the Group’s UAE operations demonstrated resilient performance underpinned by the robust fundamentals of the Bank.

The Group’s balance sheet remains strong, with total assets standing at Dh37.09 billion at the close of the first quarter 2021 compared to Dh36.14 billion at the yearend 2020.

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.

The Group continues to also enjoy comfortable liquidity and a solid capital position with a customer deposit base of D 24.05 billion at the end of Q1 2021 compared to Dh 23.67 billion at year-end 2020.

Lebanon woes

Bank of Shajah Group has fully complied with Banque du Liban’s (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. However, the restating of accounts of ELBank, adjusting for the loss of purchasing power of Lebanese pound has seen substantial erosion in earnings.

The non-monetary items of the balance sheet, income statement, statement of other comprehensive income and statement of cash flows ELBank too have been adjusted for inflation.