Bank of Sharjah profit plunges to Dh152m

Bank of Sharjah's net profits fell to Dh152 million in the first half of 2010, down from Dh276 million a year earlier. The bank blamed a slower than expected recovery of the UAE economy following the financial crisis and new risk classification measure introduced by the country's central bank. "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. Article continues below "Moreover, the adoption of new accounting standards has brought us into uncharted territory regarding the recognition of actual profit and thereafter its distribution," he added. Bank of Sharjah constituted a further Dh70 million of collective impairment provisions during the second quarter of 2011. As of June 30, 2011, the bank's collective impairment provisions reached Dh432 million, of which Dh90 million was constituted during the first half of 2011 versus nothing 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. But the bank was upbeat, with total assets increased 13 per cent from a year earlier, at Dh21.3 billion compared to Dh18.7 billion, and liquidity surging by 73 per cent in the first half of 2011. As of June 30, 2011, the results revealed, the bank's net liquidity stood at Dh5 billion versus Dh.9 billion in the corresponding period of 2010. Reflective of reality "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," Nerguizian said. "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." In the second quarter of 2011, net interest income registered a five per cent increase over the first quarter of 2011 despite the five per cent increase in customer deposits during the second quarter, due to the reduction of interest rates on these deposits during this period.