Bank of Sharjah today announced its financial results for the six months ending June 30, 2014. The bank’s net profit for the first half of 2014 increased by 6% to reach AED 152 million, compared with AED 144 million for the same period of 2013. During the period, the Bank continued to grow its loan book while maintaining the solid structure of the balance sheet, with high levels of both liquidity and capital.
As of June 30, 2014, loans and advances reached AED 13,947 million, 8% above the corresponding 2013 figure of AED 12,895 million, and 6% more than the December 31, 2013, balance of AED 13,135 million.
Total assets reached AED 23,805 million in the first six months of 2014, an increase of 5% over the corresponding June 30, 2013, figure of AED 22,673 million. When compared to the December 31, 2013 figure, total assets declined slightly by 5% from AED 24,973 million. This was mainly driven by a 6% decline in customer deposits from AED 18,374 million in December 31, 2013, to AED 17,217 million as of June 30, 2014.
The main reason for the decline in deposits was due to the unwinding of expensive and unstable deposits. However, when compared to the same period of last year, customer deposits increased by 3% from AED 16,644 million to AED 17,217.
This also accounts for the drop in net liquidity between December 2013 and June 2014. However, the bank’s net liquidity remained substantially high, compared to industry levels, at AED 5.3 billion, representing more than 30% of customer deposits.
Shareholders’ equity at the end of the second quarter of 2014 stood at AED 4,278 million, 5% above the balance for the corresponding period of 2013. However, it declined by 2% when compared to the December 31, 2013 figure of AED 4,353 million. This was mainly caused by the AED 176 million cash dividend declared and distributed during the period on 2013 profits. The bank enjoys a strong capital adequacy ratio, which stood at 21.69% as of June 30, 2014, significantly above the required regulatory ratio.
Total operating income for the six months ending June 30, 2014, declined by 18% compared to the corresponding period of 2013, mainly due to the decline in both net interest income and non-interest income. The decline in net interest income was mostly driven by the overall decline in market interest rates, and the fact that the high liquidity held by the bank is placed in money market instruments generating negligible yields.
Meanwhile, the decline in non-interest income resulted from the unrealised revaluation losses on the investment portfolio due to the sharp declines witnessed by the UAE stock markets, exacerbated by margin trading. Bank of Sharjah’s management believes that those declines are temporary, and markets will adjust during the third quarter when operating income will resume its upward trajectory.
Net impairment charges on financial assets for the first half of 2014 declined by 67%, as a result of the improved economic environment and the overall performance of the credit portfolio. Operating income after impairment charges was therefore up by 2%.
All the above led to the 6% increase in net profit for first half of 2014 to reach AED 152 million, compared with AED 144 million for the same period of 2013. As a result, earnings per share for the period were up by 9% to reach 6.8 fils, compared to 6.2 fils in 2013.
Mr. Varouj Nerguizian, the Bank’s Executive Director and General Manager, said: “As a corporate and investment bank, we were affected by the market slump; however, this is an interim situation that will be corrected by year end”.
Mr. Ahmed Al Noman, Chairman of the Board, added: “We have all along warned against the consequences of margin trading on the UAE nascent financial market in the absence of market makers or institutional investors and sophisticated investors. And with the Emerging Market status and the relaxation of the foreign ownership rules, we have also invited external players whose sole objective or aim is the booking of short term profit.”
