Bank of Sharjah announced its financial results for the six months ending June 30, 2012. Bank of Sharjah sustained its balance sheet structure and the soundness of its assets during the first half of 2012 while the world economy underwent ongoing challenges.
The bank capitalized on its core activity and increased net interest income by 5%. This was achieved by reducing the cost of funding, mainly on customer deposits, despite the increase in deposits. Also, net fees and commissions income increased by 7%.
Nevertheless, the Euro Zone debt crisis and the continued concerns about the global economy weighed heavily on the international and local stock markets. This led non-interest income to decline by 31% – despite the 7% improvement in the commission and fees income during the period – which was reflected in the overall 5% slump in total income.
As a result, net income for the period reached Dhs125m compared to Dhs152m in the corresponding 2011 period. While this figure represents an 18% drop for the period it is similar to the average of 2011.
Total assets reached Dhs21,019m in line with the December 31, 2011 figure of Dhs20,934m.
The Bank continued to increase its deposits base which reached Dhs15,031million as of June 30, 2012, a slight increase of 1% over the December 31, 2011 figure of Dhs14,940m.
Loans and advances reached Dhs12,049 comparable to the December 31, 2011 figure of Dhs12,039m.
Loans-to-deposits ratio further improved during the period to 0.80 in June 2012 from 0.81 in December 2011.
Shareholders’ equity at the end of the first half stood at Dhs4,019m, a 4% decline compared to the December 31, 2011 figure of Dhs4,199m. This was mainly caused by the additional shares acquired through the share buyback during the first quarter of the year, in addition to the dividend distribution on the 2011 profits.
In light of the continued challenging economic environment, the Bank pursued its prudent policy of raising further general provisions. During the second quarter of 2012, the Bank has set aside Dhs30m of such provisions, bringing the charge for the period ending June 2012 to Dhs91m, similar to the 2011 corresponding period. As such, the Bank’s collective impairment provision balance as of June 30, 2012 stood at Dhs636m.
To build upon the growth witnessed in the recent years a new branch was opened in Dubai Media City and the Bank is considering opening another branch in the Emirate of Abu Dhabi in Mussafah, the industrial area of Abu Dhabi. This is in line with the Bank’s expansion strategy to further avail its services to existing and prospective customers throughout the country. Also, to that effect the Bank has signed a cooperation agreement with Commerzbank International S.A. to establish a Private Banking Wealth Management (PBWM) division which will be launched during the year. This initiative will expand and diversify the reach of the Bank’s financial services by catering to a niche market to discerning customers. As part of its endeavor to expand its banking presence, the Bank has acquired a new building to relocate its head office operations, pending the construction of its headquarters which will be an architectural icon in the skyline of Sharjah.
Lately the Bank’s share price has come under unwarranted pressure caused by the forced liquidation of the Bank’s shares offered as collateral to a non-resident bank. The constraints imposed by the local regulator – with the intention of protecting the interests of minority shareholders – have deprived major shareholders who are also members of the Board and senior management from the means of protecting shareholders’ interests. As a result, the Bank shares are traded below their fair value and do not reflect the underlying financial strength of the Bank.
Commenting on the results, Mr. Varouj Nerguizian, the Bank’s Executive Director and General Manager, said: “To properly secure customers’ and investors’ best interests, the Bank has adopted a prudent and conservative policy of allocating additional general provisions. While this policy curbs the Bank’s short-term profitability, it will ensure the Bank’s long term sustainability and potential. Since these provisions are general in nature, they could be recovered in the future once the economic situation improves. The Bank’s potential remains quite promising given its solid capital and strong liquidity.”
He then added that, “As a result of the decline in the equity markets during the second quarter of the year, share prices have reached low levels that will make them attractive and lead to a market rebound expected during the last quarter of the year.”
Ameinfo
