Bank of Sharjah today announced its financial results for the nine months ending September 30, 2011, showing a significant increase in the bank’s deposit base and liquidity position.
Bank of Sharjah’s net profit for the nine months ending September 30, 2011 reached AED 216 million, compared to AED 393 million in the corresponding period of 2010. The decrease in the current period was mainly caused by an increase in collective impairment provisions.
Total assets reached AED 21,507 million, an increase of 7 per cent over the corresponding September 30, 2010 figure of AED 20,095 million. Total assets registered a 4 per cent increase over the December 31, 2010 balance of AED 20,618 million. The increase in total assets was mainly driven by an increase in customer deposits.
Over the last year, Bank of Sharjah has successfully managed to substantially increase its deposits base. Total deposits reached AED 15,685 million as of September 30, 2011, an increase of 14 per cent over the corresponding September 30, 2010 figure of AED 13,709 million, revealing customers’ confidence in the Bank. Compared to the December 31, 2010 figure of AED 14,377 million, the increase in deposits was 9 per cent.
The Bank’s loans and advances reached AED 12,775 million, an increase of 6 per cent over the corresponding September 30, 2010 figure of AED 12,107 million. The increase over the December 31, 2010 figure of AED 12,107 million was also 6 per cent.
The continuous increase in deposits over loans and advances has significantly enhanced the Bank’s loans-to-deposits ratio which further reduced during the period to reach 0.81 in September 2011, from 0.84 in December 2010 and 0.88 in September 2010.
The Bank’s equity at the end of the this period stood at AED 4,220 million, comparable to the corresponding September 2010 figure of AED 4,231 million and 4 per cent below the December 31, 2010 figure of AED 4,395 million. The decline from the December figure was mainly due to the exercise of share buy back; during this period the bank has acquired more than 97.2 million shares worth AED 175 million.
Compared to the corresponding period of 2010, net liquidity surged by 32 per cent during this period of 2011. As of September 30, 2011, net liquidity stood at AED 5,117 million versus AED 3,874 million as of September 30, 2010. When compared to the December 31, 2010, figure of AED 4,682 million, net liquidity also increased by 9 per cent.
This improvement in liquidity, which was driven by the 14 per cent increase in deposits, led to a 10 per cent drop in net interest income, due to the depressed interbank interest rates.
In view of the slower than expected recovery in the U.A.E economy and because of the new risk classification measures introduced by the U.A.E Central Bank, the Bank considered it prudent to further constitute AED 40 million of collective impairment provisions during the third quarter of 2011. As of September 30, 2011, the Bank’s collective impairment provisions reached AED 472 million, of which AED 130 million were constituted during 2011 versus nil in the corresponding period of 2010; this caused a 45 per cent decline in the current year net income and in turn led to a drop in the earnings per share figure.
During this quarter, Bank of Sharjah has signed a USD 135 Million Club Term loan facility with four Mandated Lead Arrangers, three of which are multinational banks. The deal reflects the strong relationship all participating lenders have with Bank of Sharjah and the solid confidence they have in its financial strength and sustainable performance that transcend difficult economic conditions.
Commenting on the results, Mr. Varouj Nerguizian, Executive Director and General Manager at Bank of Sharjah, said: “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. The concerns of the MENA region were compounded further by sovereign debt crises in Europe that have engendered concerns over a global recovery. The context of sustained market speculation has yielded a slower-than-hoped rebound in the UAE economy. Given that the banking sector is nuanced by overall macroeconomic trends, the subdued business environment that currently characterises the UAE will be reflected in banking results in 2011 and 2012.
Elaborating further, Mr. Nerguizian contended: “In light of current circumstances, perhaps the mandatory listing of public joint stock companies should be re-evaluated, considering that market makers have exhibited no impetus to ensure market liquidity. The erosion of share value remains an additional burden on the balance sheets of companies and banks alike, in terms of portfolio and collateral valuations.
“While profitability is lagging behind due to general provisions, effective performance should be compared to the average of both net income and comprehensive income of 2010, as the year-end figures are more reflective of the reality than the quarterly figures. In an uncertain environment, prudential provision remains the key to meeting the unexpected.
“During the period 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. The conservative policy of maintaining high liquidity ratios adopted by the bank since inception has proved its vital importance especially during the aftermath of the global financial crisis and its direct repercussions on the U.A.E economy.”
Bank of Sharjah welcomes the establishment of Emirates Development Bank and believes it will trigger the much needed momentum for the revival of the real estate market.