Bank of Sharjah's first half net profit rises 32%

The organisation's business growth has been credited to the sustained increase in its core banking activities, an accomplishment that reflects the strength of the bank's balance sheet and the quality of its assets.

Bank of Sharjah's net profit for the first half period reached Dhs258m, a 32% increase over the corresponding June 2008 figure of Dhs195m.

The profit for the 2009 second quarter reached Dhs149m, compared to Dhs109 for the first quarter; a 37% increase. The bank's performance during the second quarter was attributed mainly to the increase in the net interest income and the relative improvement of the U.A.E. financial markets.

Bank of Sharjah's strong profits have been achieved despite additional collective impairment provisions against the credit portfolio taken during the quarter, which brought the total charge for the period ending June 2009 to Dhs45m.

The collective impairment provision had been increased by the bank's management, who considered it a prudent move because of the continued challenging market environment. As of June 30, 2009, the total collective impairment provision had reached the sum of Dhs115m.

The increase was in line with the bank's conservative strategy adopted since its inception; a policy that has spared the bank from exposure to any of the failed institutions, such as the Saudi Groups, that have impacted upon other banks in the region.

The strong results in profitability were reflected in the earnings per share for the period, which increased by as much as 27% to reach Dhs12.8 fils against Dhs10.9 fils for the corresponding period last year.

Bank of Sharjah's increase in its current period net interest income reached an outstanding 98% over the 2008 corresponding period. This was the result of the substantial rise in the loans and advances portfolio.

The bank's loans and advances reached Dhs11.1bn for the first half of the year, registering a 62% increase over the Dhs6.9bn figure reported for the same period in 2008. This was partly attributed to the phenomenal growth of the institution witnessed during the second half of last year and also due to its acquisition of the assets and liabilities of BNPI branch in Lebanon, which it acquired through its subsidiary Emirates Lebanon Bank S.A.L.

The procurement, which took place during the last quarter of 2008, added Dhs1.8bn to the loans and advances portfolio of the current period; a figure that represented 42% of the current period growth.

The 7% growth in the loans and advances portfolio over the December 2008 figure of Dhs10.3bn was indicative of the bank's management policy of sustaining the growth witnessed during 2008 while managing liquidity without hampering growth and meeting the clients' financing requirements.

The Lebanon BNPI branch procurement was a first for the country, as never before had a UAE-based bank acquired a majority stake in a Lebanese operation. The pioneering move has allowed Bank of Sharjah to create a platform in the dynamic Levant, asserting itself as a key regional player.

The acquisition earned the bank the 'Merger and Acquisition Deal of the Year' for the Middle East from the Financial Times Business - The Banker Magazine, which it collected in the second half of 2009.

The bank was judged on the degree to which the client's objectives were met, the complexity, innovation and speed of execution, as well as pricing performance and funding. The acquisition was partly responsible for the bank's 81% general and administrative expenses increase, which reached Dhs88m compared to the Dhs50m figure for the same period of 2008.

Despite the fierce competition over deposits, which led to a rise in the deposits' interest rates, Bank of Sharjah successfully managed to substantially increase this aspect of its financial portfolio.

By June 2009, the institution's deposits had increased to 11.5bn; a 14% increase from December 2008's figure of 10.1bn. However, fuelled by the BNPI Lebanon acquisition, the yearly increase taken from June 2008's balance of Dhs7.2bn registered a huge 60% growth over the twelve month period.

This has remarkably improved the bank's net liquidity, with net liquidity for the period ending June 2009 standing at Dhs2.7bn; a 25% rise over the December 2008 figure of Dhs2.2bn.

The bank's equity grew by 3%, even after the payment of Dhs261m of cash dividends during the second quarter; a figure that represented 15% of the capital prior to the 15.11% capital increase, due to the bonus share issue on the 2008 profits.

The quality of Bank of Sharjah's credit portfolio, the economic sectors that the institution is exposed to and its customer base have shielded it from the worst effects of the economic downturn.

Its strong performance continues to be recognised by industry commentators, with Capital Intelligence reconfirming its A- Foreign Currency long-term rating in their July 2009 report and Fitch reaffirming its rating for Bank of Sharjah at A- in February 2009.